Derive MLEs and conditional Normal distributions
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This question evaluates proficiency in parametric inference and probability theory, specifically maximum likelihood estimation, bias of estimators, and conditioning in univariate and bivariate Normal distributions including constrained estimation of parameters.
Suppose X1,…,Xn are i.i.d. Normal(μ, σ^2) and, independently, (X, Y) is one draw from a bivariate Normal with means μX, μY, variances σX^2, σY^2, and correlation ρ. Answer the following, showing all algebraic steps: (a) Write the pdf and cdf of Normal(μ, σ^2). Using them, express P(μ − σ ≤ X1 ≤ μ + σ) in terms of the standard Normal cdf Φ. (b) Derive the MLEs of μ and σ^2: (i) when σ^2 is known; (ii) when both μ and σ^2 are unknown; (iii) when μ is constrained so that μ ≥ 0 (give the closed-form MLE for μ and explain what happens when the unconstrained MLE is negative). (c) For the bivariate Normal (X, Y), derive the conditional distribution of X | Y = y: give its mean and variance and write the conditional pdf and cdf; then compute P(X > t | Y = y) in terms of Φ. (d) Is the usual MLE of σ^2 unbiased? If not, provide an unbiased estimator for σ^2 and relate it to the MLE.
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