Econometric Methods, ECO341A, Semester I, 2015-16

Homework II (60 points)

Instructor: M.A. Rahman
Deadline: 2:50 pm, September 23, 2015.

Please read the instructions carefully and follow them while writing answers.
Solutions to homework should be written in A4 size loose sheets. If you are not comfortable
writing on white sheets, please ask for biology paper in Tarun Book Store.
Questions should be answered in order as they appear in the homework. Every new question
should begin in a new page. Please number all the pages of your homework solution.
Please leave a margin of one inch from top and one inch from left. Staple the sheets on the
top-left.
Matlab assignments (if any) and written answers should be together and in order.

1. (8 points) Matlab Exercise. Suppose Yi Bernoulli(p) for i = 1, 2, , n, and the following

20 values were generated: 0, 0, 1, 0, 1, 1, 1, 1, 0, 0, 1, 0, 0, 1, 0, 1, 1, 0, 0, 0 from the distribution. Use
the Newton-Raphson procedure to maximize the log-likelihood function and find the MLE of the
parameter p.
2. (12 points) Matlab Exercise. Let Yi N (, 2 ) for i = 1, 2, , n, and suppose 30 values
presented in Q2.xlsx were generated from the distribution. Use the Newton-Raphson procedure
to maximize the log-likelihood function and find the MLE of (, 2 ).
3. (6 + 6 = 12 points) Let X1 , X2 , be independent and identically distributed random
variables with mean , variance 2 and 4 = E(X1 )4 = 4 4 with 4 > 1. Then show the
following,
p

(a) s2n 2
(b)

d

n s2n 2 N 0, (4 1) 4 .

P
Note that 4 is the kurtosis and s2n is the unbiased estimator of 2 . (Hint: Define s2mle = ni=1 (Xi
2 /n and show s2n converges in probability to s2 ). Unlike lecture notes, you will have to show
X)
mle
that variance of s2mle goes to zero.
4. (8 points) Let X1 , X2 , be a sequence of independent and identically distributed random
variables each uniform on [0,1]. For the geometric mean,
Gn = (X1 X2 Xn )1/n ,
p

show that Gn c for some constant c. Find c.

5. (4 + 6 = 10 points) Let X1 , X2 , , Xm be a random sample from a N (, 2 ) distribution,
and independently let Y1 , Y2 , , Yn be a random sample of size n from a N (, 2 ) distribution
with > 0 unknown.
(a) Find the MLE of if and 2 are known.
(b) Suppose, and 2 are unknown. Find the MLEs of , 2 and .
6. (1 + 3 + 3 + 3 = 10 points) Consider a centered Laplace distribution that has the following
pdf,
1
exp(|x|/),
f (x|) =
2
where the shape parameter > 0. Based on the above pdf, answer the following.
(a) Find E(X).
(b) Find the method of moments estimator for using the first moment. What do you observe?
(c) Find the method of moments estimator for using the second moments.
(d) Find the maximum likelihood estimator of . Is it same as the method of moments estimator?