The Matrix-Logarithmic Covariance Model

Abstract A flexible method is introduced to model the structure of a covariance matrix C and study the dependence of the covariances on explanatory variables by observing that for any real symmetric matrix A, the matrix exponential transformation, C = exp (A), is a positive definite matrix. Because there is no constraint on the possible values of the upper triangular elements on A, any possible structure of interest can be imposed on them. The method presented here is not intended to replace the existing special models available for a covariance matrix, but rather to provide a broad range of further structures that supplements existing methodology. Maximum likelihood estimation procedures are used to estimate the parameters, and the large-sample asymptotic properties are obtained. A simulation study and two real-life examples are given to illustrate the method introduced.

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