Use of moment generating functions

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Transcript Use of moment generating functions

Use of moment generating functions

Definition

Let

X

denote a random variable with probability density function

f

(

x

) if continuous (probability mass function

p

(

x

) if discrete) Then

m X

(

t

) = the moment generating function of

X

          

x tx

 

tx

 

The distribution of a random variable

X

is described by either 1.

2.

3.

The density function

f

(

x

) if

X

continuous (probability mass function

p

(

x

) if

X

discrete), or The cumulative distribution function

F

(

x

), or The moment generating function

m X

(

t

)

Properties

1.

m X

(0) = 1 2.

m X

3.

k

m X

 

k th

k

 derivative of

m X

  at

t

 0.

   

k

 

k

   1

t

  2!

2

t

2 

X

continuous

X

discrete  3!

3

t

3   

k k

!

t k

 .

4. Let

X

be a random variable with moment generating function

m X

(

t

). Let

Y

=

bX

+

a

Then

m Y

(

t

) =

m bX

+

a

(

t

) =

E

(

e

[

bX

+

a

]

t

) =

e at m X

(

bt

) 5. Let

X

and

Y

be two independent random variables with moment generating function

m X

(

t

) and

m Y

(

t

) . Then

m X+Y

(

t

) =

m X

(

t

)

m Y

(

t

)

6. Let

X

and

Y

be two random variables with moment generating function

m X

(

t

) and

m Y

(

t

) and two distribution functions

F X

(

x

) and

F Y

(

y

) respectively. Let

m X

(

t

) =

m Y

(

t

) then

F X

(

x

) =

F Y

(

x

). This ensures that the distribution of a random variable can be identified by its moment generating function

M. G. F.’s - Continuous distributions

Name Continuous Uniform Exponential Gamma  2  d.f. Normal Moment generating function M X (t)        e bt -e at [b-a]t t   for t <     t    for t <    1 1-2t    /2 for t < 1/2

e t

 +(1/2)

t

2  2

M. G. F.’s - Discrete distributions

Name Discrete Uniform Bernoulli Binomial Geometric Negative Binomial Poisson Moment generating function M X (t) e t N e tN -1 e t -1 q + pe t (q + pe t ) N pe t 1-qe t   pe t 1-qe t   e  (e t -1) k

Moment generating function of the gamma distribution

m X

    

tx

  where         

x

  1

e

 

x

0

x

 0

x

 0

m X

or using     

tx

     0 

e tx

           0 

x

x

  1

e

 0   

b a

  0 

x a x

 1

e a

  1

e bx

dx bx

dx

 

b a

1

e

   

x dx dx

then

m X

       0 

x

  1

e

  

dx

        

t

       

t

  

t

 

Moment generating function of the Standard Normal distribution

m X

    

tx

  where  1 2 

e

x

2 2 thus

m X

   

e tx

1 2 

e

x

2 2

dx

    1 2 

e

x

2 2 

tx dx

We will use  0  1 2 

b e

  2

b

2  2

dx

 1

m X

            1 2  1 2  1 2 

e

x

2 2 

tx dx e

x

2  2

tx

2

dx e

x

2  2  2 2

t

2

t

2 

e

2   

t

2 

e

2 1 2 

e

  2  2

dx

Note:

m X e x t

2 

e

2

x x

2 2!

x

3 3!

 2

t x

4 4!

t

3

t

2 2  2!

 3!

t

2 2 

t

4 2 2 2!

t

6 3 2 3!

 

t

2

m

2

m m

!

 Also

m X

 1

t

  2!

2

t

2   3!

3

t

3 

Note:

m X

Also

e x t

2 

e

2

x x

2 2!

x

3 3!

 2

t x

4 4!

t

3

t

2 2  2!

 3!

m X

k

t

2 2

k th

t

4 2 2 2!

 1

t

 

t

6 3 2 3!

 2 2!

moment 

t

2      

t

2

m

2

m

 3

t

3  3!

k

 

m

!

Equating coefficients of

t k

, we get 

k

 for

k

 1 2

m m

!

2 2

m m

  !

hence  1  0,  2  1,  3  0,  4  3

Using of moment generating functions to find the distribution of functions of Random Variables

Example

Suppose that

X

has a normal distribution with mean  and standard deviation 

.

Find the distribution of

Y = aX + b

Solution:

m X m

e

t

  2 

bt e m X

bt e e

   2   2 2 

e

a

    2 2 2

a t

2 = the moment generating function of the normal distribution with mean

a

+ b

and variance

a

2  2

.

Thus

Y = aX + b

has a normal distribution with mean

a

+ b

and variance

a

2  2

.

Special Case:

the

z

transformation

Z

X

    1 

X

    

aX

b

Z

Z

2 

a

 

a

2  2 1       2  2   1     0 Thus

Z

has a standard normal distribution .

Example

Suppose that

X

and

Y

are independent each having a normal distribution with means 

X

and 

Y

, standard deviations 

X

and 

Y

Find the distribution of

S = X + Y

Solution:

m X

e

X t

 

X

2

m Y

e

Y t

 

Y

2 Now

m

m X

   

Y

e

X t

 

X

2

e

Y t

 

Y

2

or

m

e

 

X

 

X

t

   2

X

  2

Y

t

2 2 = the moment generating function of the normal distribution with mean variance  2

X

  2

Y

X +

Y

and Thus

Y = X + Y

has a normal distribution with mean 

X +

Y

and variance  2

X

  2

Y

Example

Suppose that

X

and

Y

are independent each having a normal distribution with means 

X

and 

Y

, standard deviations 

X

and 

Y

Find the distribution of

L = aX + bY

Solution:

m X

e

X t

 

X

2

m Y

e

Y t

 

Y

2 Now

m

m aX

e

X

 

bY

  2

X

  2 2

e

Y

m X

  2

Y

2 2

or

m

e

a

X

b

X

t

 

a

2  2

X

b

2  2

Y

t

2 2 = the moment generating function of the normal distribution with mean

a

and variance

a

2  2

X

b

2  2

Y

X + b

Y

Thus

Y = aX + bY

has a normal distribution with mean

a

variance

a

2  2

X

b

2  2

Y

X + B

Y

and

Special Case:

a

= +1 and

b

= -1.

Thus

Y = X - Y

has a normal distribution with mean 

X -

Y

and variance 2  2

X

2 

Y

2   2

X

 

Y

2

Example

(Extension to

n

independent RV’s) Suppose that

X

1 ,

X

2 , …,

X n

are independent each having a normal distribution with means (for

i =

1, 2, … ,

n

) 

i

, standard deviations 

i

Find the distribution of

L = a

1

X

1

+ a

1

X

2

+ …+ a n X n

Solution:

m X i

e

i t

 

i

2 (for

i =

1, 2, … ,

n

) Now

m

1  

n

m

m X

1

 

1 1

m X n

 

n m

e

 1     1 2   2 2

n e

n

    2

n

  2 2

or

m

1   

e

a

a n

n

t

 

a

1 2  1 2 2

a n

2  2

n

t

2

n

= the moment generating function of the normal distribution with mean and variance

a

1 2  1 2

a n

2 

a

1 2

n

 1 ...

a n

n

Thus

Y = a

1

X

1 and variance

+ … + a n X n

distribution with mean

a

1

a

1 2  1 2  1

a n

2 has a normal 

+ …+ a n

2 

n n

Special case:

a

1 

a

2   1   2   1 2   1 2   

a n

n

 1 

n

   1 2   2 In this case

X

1 ,

X

2 , …,

X n

is a sample from a normal distribution with mean  , and standard deviations , and

L

 1

n

X

1 

X

2  

X n

 

X

 the sample mean

Thus

Y a x

1 1

a x n n

x

1

x n

has a normal distribution with mean 

x

 

a

1  1   

a n

n

  and variance 

x

2 

a

1 2  1 2  1   2  2

a n

2 

n

2 2  2 

n

2  2   2

n

Summary

If

x

1 ,

x

2 , …,

x n

is a sample from a normal distribution with mean  , and standard deviations , then

x

 the sample mean has a normal distribution with mean 

x

  and variance  2

x

  2

n

  standard deviation 

x

 

n

 

0.4

0.3

0.2

0.1

0 20 Sampling distribution of

x

30 40 50 Population 60

The Central Limit theorem

If

x

1 ,

x

2 , …,

x n

with mean is a sample from a distribution  , and standard deviations , then if

n

is large

x

 the sample mean has a normal distribution with mean 

x

  and variance 

x

2   2

n

  standard deviation 

x

 

n

 

Proof:

(use moment generating functions) We will use the following fact: Let

m

1 (

t

),

m

2 (

t

), … denote a sequence of moment generating functions corresponding to the sequence of distribution functions:

F

1 (

x

) ,

F

2 (

x

), … Let

m

(

t

) be a moment generating function corresponding to the distribution function

F

(

x

) then if then

i

lim 

i

lim 

i

 

 

Let

x

1 ,

x

2 , … denote a sequence of independent random variables coming from a distribution with moment generating function

m

(

t

) and distribution function

F

(

x

).

Let

S n

=

x

1 +

x

2 + … +

x n

then

m S n

m x

1

x n

=

m x

1

t m x

2

m x n n

= now

x

 or

m t x

 

x

1 

x

2  

n

m

1  

S n

x n m

S n S n n t

    

m

   

n

Let

z

x

  

n

 

n x

n

  then

m t z

 

e

n

 

t m x

  

nt

  

e

n

 

t

 

m

  

nt n

   

n

and ln

z

 

n

 

t

n

ln 

m

  

t n

   

Let

u

 

t n

or

n

t

u

and

n

t

2  2

u

2 Then ln

z

 

n

 

t

n

ln 

m

  

t

 

t

 2  2

u

t

2  2

u

2 ln

n

     

t

2 2 ln

u

2 

u

n

 

z

   

u

lim ln  0 

z

    

t

2 2

u

lim  0 ln

u

2 

u

 

t

2 2

u

lim  0

   

  using L'Hopital's rule 2

u

     

2 2  

t

2 2

u

lim  0 2 using L'Hopital's rule again

 

t

2 2

u

lim  0

   

2 2

 

2 using L'Hopital's rule again  

t

2 2

m

  

t

2 2 thus lim ln

n

  2 2 2

m

 

i

2 

t

2 2

z

 

t

2 2 and lim

n



z

  

t

2 

e

2

Now

 

t

2 

e

2 Is the moment generating function of the standard normal distribution Thus the limiting distribution of

z

is the standard normal distribution i.e. lim

n



 

x

  1 2 

e

u

2 2

du

Q.E.D.