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Exercise 14

Problem 1: Find the maximum likelihood estimator for and o 2. Problem 2: Find the asymptotic distribution of the estimators. Problem 3: Minimizing quadratic costs.

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25 views

Exercise 14

Problem 1: Find the maximum likelihood estimator for and o 2. Problem 2: Find the asymptotic distribution of the estimators. Problem 3: Minimizing quadratic costs.

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api-3737025
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© Attribution Non-Commercial (BY-NC)
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Exercise Session 14, Dec 8th ; 2006

Mathematics for Economics and Finance


Prof: Norman Schürho¤
TAs: Zhihua (Cissy) Chen, Natalia Guseva

Problem 1 Let X1 ; :::; Xn be i.i.d N ( ; 2 ).


(a) Show the statistics sample variance S 2 is unbiased estimator for 2 :
Compute MSE of the estimator.
(c) An alternative estimator for 2 is the maximum likelihood estimator ^ ,
show ^ = nn 1 S 2 .
(d) Is ^ a biased estimator? What is the variance of ^ ?
(e) Show that ^ has smaller MSE than S 2 :Explain why.

Problem 2 Take the regression model y = X + " and assume that


n 1 n KK 1 n 1
it ful…lls the main assumptions of the linear regression model. Furthermore,
assume that y=X N (X ; 2 In ):
(a) Write the log likelihood function.
(b) Find the MLE estimators for and 2 :
(c) Compute the Cramer-Rao lower bound and the Fisher Information ma-
trix.
(d) Find the asymptotic distribution of the estimators.

Problem 3 (One-Sector Growth Model)


Consider the intertemporal optimization problem
1
X
t
max1 u(ct ) s:t: kt+1 + ct = f (kt ); k0 0 given.
fct ;kt gt=0
t=0

Assume u(c) = ln c; f (k) = Ak ; with A > 0; 2 (0; 1); 2 (0; 1):

Problem 4 Minimizing quadratic costs. The agent solves


1
X
t
min x2t + vt2
fvt g
t=0
st: xt+1 = 2xt + vt
x0 is given, 0 < <1

Assume the transversality condition is satis…ed.

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