Cross-Validation, Shrinkage and Variable Selection in Linear Regression Revisited

In deriving a regression model analysts often have to use variable selection, despite of problems introduced by datadependent model building. Resampling approaches are proposed to handle some of the critical issues. In order to assess and compare several strategies, we will conduct a simulation study with 15 predictors and a complex correlation structure in the linear regression model. Using sample sizes of 100 and 400 and estimates of the residual variance corresponding to R of 0.50 and 0.71, we consider 4 scenarios with varying amount of information. We also consider two examples with 24 and 13 predictors, respectively. We will discuss the value of cross-validation, shrinkage and backward elimination (BE) with varying significance level. We will assess whether 2-step approaches using global or parameterwise shrinkage (PWSF) can improve selected models and will compare results to models derived with the LASSO procedure. Beside of MSE we will use model sparsity and further criteria for model assessment. The amount of information in the data has an influence on the selected models and the comparison of the procedures. None of the approaches was best in all scenarios. The performance of backward elimination with a suitably chosen significance level was not worse compared to the LASSO and BE models selected were much sparser, an important advantage for interpretation and transportability. Compared to global shrinkage, PWSF had better performance. Provided that the amount of information is not too small, we conclude that BE followed by PWSF is a suitable approach when variable selection is a key part of data analysis.