Direct Nonlinear Shrinkage Estimation of Large-Dimensional Covariance Matrices
نویسندگان
چکیده
This paper introduces a nonlinear shrinkage estimator of the covariance matrix that does not require recovering the population eigenvalues first. We estimate the sample spectral density and its Hilbert transform directly by smoothing the sample eigenvalues with a variable-bandwidth kernel. Relative to numerically inverting the so-called QuEST function, the main advantages of direct kernel estimation are: (1) it is much easier to comprehend because it is analogous to kernel density estimation; (2) it is only twenty lines of code in Matlab — as opposed to thousands — which makes it more verifiable and customizable; (3) it is 200 times faster without significant loss of accuracy; and (4) it can handle matrices of a dimension larger by a factor of ten. Even for dimension 10, 000, the code runs in less than two minutes on a desktop computer; this makes the power of nonlinear shrinkage as accessible to applied statisticians as the one of linear shrinkage.
منابع مشابه
Nonlinear shrinkage estimation of large-dimensional covariance matrices
Many statistical applications require an estimate of a covariance matrix and/or its inverse. Whenthe matrix dimension is large compared to the sample size, which happens frequently, the samplecovariance matrix is known to perform poorly and may suffer from ill-conditioning. There alreadyexists an extensive literature concerning improved estimators in such situations. In the absence offurther kn...
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