High-Dimensional Precision Matrix Estimation through GSOS with Application in the Foreign Exchange Market

Azam Kheyri, Andriette Bekker () and Mohammad Arashi
Additional contact information
Azam Kheyri: Department of Statistics, Faculty of Natural and Agricultural Sciences, University of Pretoria, Pretoria 0028, South Africa
Andriette Bekker: Department of Statistics, Faculty of Natural and Agricultural Sciences, University of Pretoria, Pretoria 0028, South Africa
Mohammad Arashi: Department of Statistics, Faculty of Natural and Agricultural Sciences, University of Pretoria, Pretoria 0028, South Africa

Mathematics, 2022, vol. 10, issue 22, 1-19

Abstract: This article studies the estimation of the precision matrix of a high-dimensional Gaussian network. We investigate the graphical selector operator with shrinkage, GSOS for short, to maximize a penalized likelihood function where the elastic net-type penalty is considered as a combination of a norm-one penalty and a targeted Frobenius norm penalty. Numerical illustrations demonstrate that our proposed methodology is a competitive candidate for high-dimensional precision matrix estimation compared to some existing alternatives. We demonstrate the relevance and efficiency of GSOS using a foreign exchange markets dataset and estimate dependency networks for 32 different currencies from 2018 to 2021.

Keywords: exchange rate; Gaussian graphical model; graphical elastic net; high-penalized log-likelihood; precision matrix estimation; ridge estimation (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/10/22/4232/pdf (application/pdf)
https://www.mdpi.com/2227-7390/10/22/4232/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:10:y:2022:i:22:p:4232-:d:970978

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().