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Problem Set 10

The document provides practice problems related to sampling and estimation as well as hypothesis testing. For sampling and estimation, it asks the reader to (1) find the method of moments and maximum likelihood estimators for a parameter of a discrete distribution based on sample data, (2) find the expected value of the maximum and minimum values of uniformly distributed random variables, (3) find the method of moments estimators for parameters of a gamma distribution, and (4) determine a constant that makes a formula an unbiased estimator of a Poisson parameter. For hypothesis testing, it asks the reader to (1) test a claim about a new light bulb manufacturing process, (2) test claims about a portfolio's return and volatility, and (3) test

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62 views

Problem Set 10

The document provides practice problems related to sampling and estimation as well as hypothesis testing. For sampling and estimation, it asks the reader to (1) find the method of moments and maximum likelihood estimators for a parameter of a discrete distribution based on sample data, (2) find the expected value of the maximum and minimum values of uniformly distributed random variables, (3) find the method of moments estimators for parameters of a gamma distribution, and (4) determine a constant that makes a formula an unbiased estimator of a Poisson parameter. For hypothesis testing, it asks the reader to (1) test a claim about a new light bulb manufacturing process, (2) test claims about a portfolio's return and volatility, and (3) test

Uploaded by

KritikaPandey
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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IME602A: Probability and Statistics

Practice problems - 10

Sampling and Estimation

(1) Suppose that X is a discrete random variable with the following probability
mass function, where 0 ≤ θ ≤1 is a parameter.

X 0 1 2 3
p( X ) 2 θ/3 θ/3 2(1−θ) /3 (1−θ)/ 3

The following 10 independent observations were taken from such a distribution:


(3,0,2,1,3,2,1,0,2,1). Find the method of moments estimator for θ and the maximum likelihood
estimator of θ.

(2) If X 1 , X 2 , … X n are independent and identically distributed random variables having uniform
distributions over (0,1) then find E [max (X 1 , X 2 , … X n)] and E [min( X 1 , X 2 , … X n )].

(3) Let X 1 , X 2 , … X n be a random sample drawn from a gamma distribution with parameters
α >0∧ λ>0, where the pd.f of the gamma random variable X is given by
1
f ( x )= λ α x α −1 e− λx , x> 0 . Find the method of moments estimator for α and λ.
Γ(α)

(4) Let X 1 , X 2 , … X n be a random sample of a Poisson random variable with parameter λ and
define
M =d { X 1 ( X 1−X 2 ) + X 2 ( X 2−X 3 ) + …+ X n −1 ( X n−1− X n ) }

Find the value of the constant d that makes M an unbiased estimator of λ .

(5) If X 1 , X 2 , … X n is a random sample of a Bernoulli distribution with parameter p then find a


linear, unbiased estimator of p with smallest possible variance. Also find this smallest variance.

Hypothesis testing

(1) Suppose that the lengths of lives of light bulbs made by a certain company are through past
experience assumed to be normally distributed with a mean of 1500 hours and standard deviation
of 100 hours. Someone in the research division of the company invents a new process for making
bulbs which preliminary research shows may have a mean lifetime of more than 1500 hours with
a standard deviation of 100 hours. It is apparent that the new process would cost the same
amount per bulb once installed. The company feels that if this new method does produce bulbs
with longer average lifetimes, they should adopt it since it would lead to increased customer
goodwill. It is assumed that the lifetime of bulbs made the new way are normally distributed
with standard deviation of 100 hours. A group of 100 bulbs are made in the new way and are
found to have a mean of 1530 hours. Set up a suitable null and alternate hypothesis to test the
claim of the new process and draw conclusion at 0.05 level of significance.

(2) A stock analyst claims to have devised a mathematical technique for selecting high-quality
mutual funds and promises that a client's portfolio will have higher average ten-year annualized
returns and lower volatility; i.e., a smaller standard deviation. After ten years, one of the analyst's
twenty-four-stock portfolios showed an average ten-year annualized return of 11.50% and a
standard deviation of 10.17%. The benchmarks for the type of funds considered are a mean of
10.10% and a standard deviation of 15.67%.
(a) Test the hypothesis that the portfolio mean beat the benchmark at 0.01 level of significance.

(b) Test the hypothesis that the portfolio standard deviation beat the benchmark at 0.01 level of
significance.

(3) A product developer is interested in reducing the drying time of a primer paint. Two
formulations of the paint are tested; formulation 1 is the standard chemistry, and formulation 2
has a new drying ingredient that should reduce the drying time. From experience it is known that
the standard deviation of drying time is 8 minutes, and this inherent variability should be
unaffected by the addition of the new ingredient. Ten specimens are painted with formulation 1,
another 10 specimens are painted with formulation 2; the 20 specimens are painted in random
order. The two sample average drying times are x́ 1=121 minutes and x́ 2=112 minutes,
respectively. What conclusions can the product developer draw about the effectiveness of the
new ingredient? What can be concluded at 0.05 level of significance? (Make suitable
assumptions).

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