Solving Multicollinearity Problem in Linear Regression Model: The Review Suggests New Idea of Partitioning and Extraction of the Explanatory Variables

https://doi.org/10.32996/jmss.2021.2.1.2

Authors

  • Kayode Ayinde, Olusegun O. Alabi Department of Statistics, Federal University of Technology Akure, Ondo State, Nigeria
  • Ugochinyere Ihuoma Nwosu Department of Statistics, Federal University of Technology Owerri, Nigeria

Keywords:

Sustainably, Regressors, Extracting, Sample size, Model parameters.

Abstract

Multicollinearity has remained a major problem in regression analysis and should be sustainably addressed. Problems associated with multicollinearity are worse when it occurs at high level among regressors. This review revealed that studies on the subject have focused on developing estimators regardless of effect of differences in levels of multicollinearity among regressors. Studies have considered single-estimator and combined-estimator approaches without sustainable solution to multicollinearity problems. The possible influence of partitioning the regressors according to multicollinearity levels and extracting from each group to develop estimators that will estimate the parameters of a linear regression model when multicollinearity occurs is a new econometrics idea and therefore requires attention. The results of new studies should be compared with existing methods namely principal components estimator, partial least squares estimator, ridge regression estimator and the ordinary least square estimators using wide range of criteria by ranking their performances at each level of multicollinearity parameter and sample size. Based on a recent clue in literature, it is possible to develop innovative estimator that will sustainably solve the problem of multicollinearity through partitioning and extraction of explanatory variables approaches and identify situations where the innovative estimator will produce most efficient result of the model parameters. The new estimator should be applied to real data and popularized for use.

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Published

2021-02-18

How to Cite

Kayode Ayinde, Olusegun O. Alabi, & Nwosu, U. I. (2021). Solving Multicollinearity Problem in Linear Regression Model: The Review Suggests New Idea of Partitioning and Extraction of the Explanatory Variables. Journal of Mathematics and Statistics Studies, 2(1), 12-20. https://doi.org/10.32996/jmss.2021.2.1.2