Simultaneous factor selection and collapsing levels in ANOVA

Summary .  When performing an analysis of variance, the investigator often has two main goals: to determine which of the factors have a significant effect on the response, and to detect differences among the levels of the significant factors. Level comparisons are done via a post-hoc analysis based on pairwise differences. This article proposes a novel constrained regression approach to simultaneously accomplish both goals via shrinkage within a single automated procedure. The form of this shrinkage has the ability to collapse levels within a factor by setting their effects to be equal, while also achieving factor selection by zeroing out entire factors. Using this approach also leads to the identification of a structure within each factor, as levels can be automatically collapsed to form groups. In contrast to the traditional pairwise comparison methods, these groups are necessarily nonoverlapping so that the results are interpretable in terms of distinct subsets of levels. The proposed procedure is shown to have the oracle property in that asymptotically it performs as well as if the exact structure were known beforehand. A simulation and real data examples show the strong performance of the method.