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  4. Distributionally Robust Inverse Covariance Estimation: The Wasserstein Shrinkage Estimator
 
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research article

Distributionally Robust Inverse Covariance Estimation: The Wasserstein Shrinkage Estimator

Nguyen, Viet Anh  
•
Kuhn, Daniel  
•
Mohajerin Esfahani, Peyman  
2022
Operations Research

We introduce a distributionally robust maximum likelihood estimation model with a Wasserstein ambiguity set to infer the inverse covariance matrix of a p-dimensional Gaussian random vector from n independent samples. The proposed model minimizes the worst case (maximum) of Stein's loss across all normal reference distributions within a prescribed Wasserstein distance from the normal distribution characterized by the sample mean and the sample covariance matrix. We prove that this estimation problem is equivalent to a semidefinite program that is tractable in theory but beyond the reach of general purpose solvers for practically relevant problem dimensions p. In the absence of any prior structural information, the estimation problem has an analytical solution that is naturally interpreted as a nonlinear shrinkage estimator. Besides being invertible and well-conditioned even for p>n, the new shrinkage estimator is rotation-equivariant and preserves the order of the eigenvalues of the sample covariance matrix. These desirable properties are not imposed ad hoc but emerge naturally from the underlying distributionally robust optimization model. Finally, we develop a sequential quadratic approximation algorithm for efficiently solving the general estimation problem subject to conditional independence constraints typically encountered in Gaussian graphical models.

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Type
research article
DOI
10.1287/opre.2020.2076
Author(s)
Nguyen, Viet Anh  
•
Kuhn, Daniel  
•
Mohajerin Esfahani, Peyman  
Date Issued

2022

Published in
Operations Research
Volume

70

Issue

1

Start page

490

End page

515

Subjects

Wasserstein metric

•

Inverse covariance estimation

•

Distributionally robust optimization

Note

Available from Optimization Online

URL
http://www.optimization-online.org/DB_HTML/2018/05/6627.html
Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
RAO  
Available on Infoscience
May 18, 2018
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/146490
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