Two-parameter ridge estimation in seemingly unrelated regression models

Abstract

Seemingly unrelated regression (SUR) models were applied when several linear regression equations were investigated at the same time. To reduce the multicollinearity influence in the SUR models, the one-parameter ridge (Ridge-1) solution was proposed and discussed by some researchers. As a generalization of the Ridge-1 solution, in the context of SUR models having multicollinearity problem, the two-parameter ridge (Ridge-2) solution was presented. Some simulations were performed to compare the proposed solution with the ordinary generalized least squares (GLS) and Ridge-1 solutions. Lastly, the proposed solution was applied on chronic renal failure effect data.