Estimation of Covariance and Precision Matrices in High Dimension
The problem of estimating covariance and precision matrices of multivariate normal distributions is addressed when both the sample size and the dimension of variables are large. The estimation of the precision matrix is important in various statistical inference including the Fisher linear discriminant analysis, confidence region based on the Mahalanobis distance and others. A standard estimator is the inverse of the sample covariance matrix, but it may be instable or can not be defined in the high dimension. Although (adaptive) ridge type estimators are alternative procedures which are useful and stable for large dimension. However, we are faced with questions about how to choose ridge parameters and their estimators and how to set up asymptotic order in ridge functions in high dimensional cases. In this paper, we consider general types of ridge estimators for covariance and precision matrices, and derive asymptotic expansions of their risk functions. Then we suggest the ridge functions so that the second order terms of risks of ridge estimators are smaller than those of risks of the standard estimators.
|Date of creation:||Jul 2012|
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- Ledoit, Olivier & Wolf, Michael, 2004.
"A well-conditioned estimator for large-dimensional covariance matrices,"
Journal of Multivariate Analysis,
Elsevier, vol. 88(2), pages 365-411, February.
- Wolf, Michael & Ledoit, Olivier, 2000. "A well conditioned estimator for large dimensional covariance matrices," DES - Working Papers. Statistics and Econometrics. WS 10087, Universidad Carlos III de Madrid. Departamento de Estadística.
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- Konno, Yoshihiko, 2009. "Shrinkage estimators for large covariance matrices in multivariate real and complex normal distributions under an invariant quadratic loss," Journal of Multivariate Analysis, Elsevier, vol. 100(10), pages 2237-2253, November.
- Jushan Bai & Shuzhong Shi, 2011. "Estimating High Dimensional Covariance Matrices and its Applications," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 199-215, November.
- Ledoit, Olivier & Wolf, Michael, 2003. "Improved estimation of the covariance matrix of stock returns with an application to portfolio selection," Journal of Empirical Finance, Elsevier, vol. 10(5), pages 603-621, December.
- Wolf, Michael & Ledoit, Olivier, 2000. "Improved estimation of the covariance matrix of stock returns with an application to portfolio selection," DES - Working Papers. Statistics and Econometrics. WS 10089, Universidad Carlos III de Madrid. Departamento de Estadística.
- Olivier Ledoit & Michael Wolf, 2001. "Improved estimation of the covariance matrix of stock returns with an application to portofolio selection," Economics Working Papers 586, Department of Economics and Business, Universitat Pompeu Fabra.
- Fisher, Thomas J. & Sun, Xiaoqian, 2011. "Improved Stein-type shrinkage estimators for the high-dimensional multivariate normal covariance matrix," Computational Statistics & Data Analysis, Elsevier, vol. 55(5), pages 1909-1918, May. Full references (including those not matched with items on IDEAS)
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