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On the Relation Between the Shrinkage Effect and a Shrinkage Method

In a recent paper van Houwelingen and le Cessie (1990) consider the shrinkage effect as well as a shrinkage method. We investigate the shrinkage effect in more detail and show that the proposed shrinkage method is tailored to remove the shrinkage effect. This appears to be not a good advice to improve predictors. However, it can be useful in predicting the future behaviour of risk groups defined by categorizing a predictor.