Optimal Ridge-type Estimators of Covariance Matrix in High Dimension

Tatsuya Kubokawa and Muni S. Srivastava
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Tatsuya Kubokawa: Faculty of Economics, University of Tokyo
Muni S. Srivastava: Department of Statistics, University of Toronto

No CIRJE-F-906, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: 　　 The problem of estimating the covariance matrix of normal and non-normal distributions is addressed when both the sample size and the dimension of covariance matrix tend to in nity. In this paper, we consider a class of ridge-type estimators which are linear combinations of the unbiased estimator and the identity matrix multiplied by a scalor statistic, and we derive a leading term of their risk functions relative to a quadratic loss function. Within this class, we obtain the optimal ridge-type estimator by minimizing the leading term in the risk approximation. It is interesting to note that the optimal weight is based on a statistic for testing sphericity of the covariance matrix.

Pages: 21 pages
Date: 2013-10
New Economics Papers: this item is included in nep-ecm
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