Empirical Bayes and the James-Stein rule

Suppose we observe 300 individual estimates y_i which are distributed \mathcal{N}(m_i, \sigma_y^2), with \sigma_y known.

Now if we assume m_i \sim \mathcal{N}(0, \sigma_m^2), the James-Stein rule gives an estimator for m_i which dominates y_i .

Below is code for a little RStudio script to see how changing the balance of variance between data y and the variance of the means changes the amount of optimal shrinkage. For more info, read the paper referenced below! It uses the RStudio’s manipulate library: info on that.

Screen Shot 2013-11-07 at 12.48.41 PM

# Stein's estimation rule and its competitors - an empirical Bayes approach
# B Efron, C Morris, Journal of the American Statistical, 1973
n <- 300
sigma.means <- 5
means <- rnorm(n, 0, sigma.means)
# sigma.y <- 5
  y <- rnorm(n,means,sigma.y)
  A <- sum((y/sigma.y)^2)/(n - 2) - 1
  B <- 1/(1 + A)
  eb <- (1 - B) * y
  plot(means, y, main="y ~ N(mean, sigma.y)\nmean ~ N(0, sigma.mean=5)")
  points(means, eb, col="red")
  legend("topleft","James-Stein estimators",col="red",pch=1)
  s <- seq(from=0,to=1,length=100)
  plot(s, sapply(s, function(b) sum((means - (1 - b)*y)^2)),
       type="l", xlab="possible values for B", ylab="sum squared error")
  points(B, sum((means - eb)^2),col="red",pch=16)
  legend("top","James-Stein B",col="red",pch=16)
}, sigma.y = slider(1,10))

4 thoughts on “Empirical Bayes and the James-Stein rule”

  1. Hey Mike, I was look at your Freebase Influence node, any tutorial or guidance on how to actually use that node to find out the list of people influenced & influencedBy. For example, I am looking to find the most influential man in history?

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