Variable selection and regularization via arbitrary rectangle-range generalized elastic net

Abstract

We introduce the arbitrary rectangle-range generalized elastic net penalty method, abbreviated to ARGEN, for performing constrained variable selection and regularization in high-dimensional sparse linear models. As a natural extension of the nonnegative elastic net penalty method, ARGEN is proved to have both variable selection consistency and estimation consistency under some conditions. The asymptotic behavior in distribution of the ARGEN estimators have been studied in this framework. We also propose an algorithm called MU-QP-RR-W-l1 to efficiently solve the ARGEN problem. By conducting simulation study we show that ARGEN outperforms the elastic net in a number of settings. Finally an application of S &P 500 index tracking with constraints on the stock allocations is performed to provide general guidance for adapting ARGEN to solve real-world problems.