A First Course in Probability (10th Edition)
A First Course in Probability (10th Edition)
10th Edition
ISBN: 9780134753119
Author: Sheldon Ross
Publisher: PEARSON
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Q 8. You fit a Pareto distribution to a sample of 200 claim amounts and use the likelihood ratio
test to test the hypothesis that a = 1.5 and 0 = 7.8. You are given:
(i) The maximum likelihood estimates are â = 1.4 and @= 7.6.
(ii) The natural logarithm of the likelihood function evaluated at the maximum likelihood
estimates is -817.92.
(iii) ln (x + 7.8) = 607.64.
Determine the result of the test.
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Transcribed Image Text:Q 8. You fit a Pareto distribution to a sample of 200 claim amounts and use the likelihood ratio test to test the hypothesis that a = 1.5 and 0 = 7.8. You are given: (i) The maximum likelihood estimates are â = 1.4 and @= 7.6. (ii) The natural logarithm of the likelihood function evaluated at the maximum likelihood estimates is -817.92. (iii) ln (x + 7.8) = 607.64. Determine the result of the test.
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