Improving on the empirical covariance matrix using truncated PCA with white noise residuals

2026-07-072026-07-07http://salesiana.dossiersoluciones.com/handle/123456789/87172The empirical covariance matrix is not necessarily the best estimator for the population covariance matrix: we describe a simple method which gives better estimates in two examples. The method models the covariance matrix using truncated PCA with white noise residuals. Jack-knife cross-validation is used to find the truncation that maximises the out-of-sample likelihood score.Atmospheric and Oceanic PhysicsImproving on the empirical covariance matrix using truncated PCA with white noise residualstext