Shrinkage estimation of large covariance matrices using multiple shrinkage targets

Abstract: Linear shrinkage estimators of a covariance matrix --- defined by a weighted average of the sample covariance matrix and a pre-specified shrinkage target matrix --- are popular when analysing high-throughput molecular data. However, their performance strongly relies on an appropriate choice of target matrix. This paper introduces a more flexible class of linear shrinkage estimators that can accommodate multiple shrinkage target matrices, directly accounting for the uncertainty regarding the target choice. This is done within a conjugate Bayesian framework, which is computationally efficient. Using both simulated and real data, we show that the proposed estimator is less sensitive to target misspecification and can outperform state-of-the-art (nonparametric) single-target linear shrinkage estimators. Using protein expression data from The Cancer Proteome Atlas we illustrate how multiple sources of prior information (obtained from more than 30 different cancer types) can be incorporated into the proposed multi-target linear shrinkage estimator. In particular, it is shown that the target-specific weights can provide insights into the differences and similarities between cancer types. Software for the method is freely available as an R-package at http://github.com/HGray384/TAS.