Abstract
This paper is concerned with deriving a new test on a covariance matrix which is based on its nonlinear shrinkage estimator. The distribution of the test statistic is deduced under the null hypothesis in the large‐dimensional setting, that is, when with variables and samples both tending to infinity. The theoretical results are illustrated by means of an extensive simulation study where the new nonlinear shrinkage‐based test is compared with existing approaches, in particular with the commonly used corrected likelihood ratio test, the corrected John test, and the test based on the linear shrinkage approach. It is demonstrated that the new nonlinear shrinkage test possesses better power properties under heteroscedastic alternative.
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