cov_estim_ridge: Ridge-Penalized Covariance Estimation

In antshi/CovEstim: (High-dimensional) Covariance Estimation

Ridge-Penalized Covariance Estimation

Description

Computes the covariance matrix estimator with a ridge-penalty.

Usage

cov_estim_ridge(data, rho)

Arguments

data	an nxp data matrix.
rho	a double, indicating the ridge penalty.

Details

The ridge-penalized covariance matrix for a data matrix X is computed with the following formula:

\hat{\Sigma}=V\left(\rho C+(1-\rho)I\right)V,

where V is the sample volatility matrix, I is a pxp identity matrix, C is the sample correlation matrix and \rho is the user-sapplied ridge penalty parameter.

Value

a list with the following entries

• a pxp estimated covariance matrix.

• an estimation specific tuning parameter, here the user-supplied ridge penalty \rho.

References

\insertRef

warton2008penalizedcovestim

Examples

data(rets_m)
sigma_ridge <- cov_estim_ridge(rets_m, rho = 0.01)[[1]]

antshi/CovEstim documentation built on June 10, 2025, 3:11 a.m.