Leeds, Mark (IED)
2006-Oct-23 13:29 UTC
[R] likelihood question not so related to R but probably requires the use of R
I have a question and it's only relation to R is that I probably need R after I understand what to do. Both models are delta y_t = Beta + epslion and suppose I have a null hypothesis and alternative hypothesis H_0 : delta y_t = zero + epsilon epsilon is normal ( 0, sigmazero^2 ) H_1 delta y_t = beta + epsilon epsilon is normal ( sigmabeta^2 ) ------------------------------------------------------------------------ ------------------------------------------------------------------------ ------ so, i calculate the MLE's under the null and the alternative as : under H_0 beta hat = 0 and sigmazero^2 hat = sum over t ( delta y_t - zero )^2/ (n-1) under H_1 beta hat = ( sum of delta y_t ) /n and sigmabeta^2 = sum over t ( delta y_t - beta hat )^2/(n-1) ------------------------------------------------------------------------ ------------------------------------------------------------------------ --------------- what i have blanked out on is how i take the estimates above and test which model is more likely given the data ? I think I used to know this so I apologize if this is a stupid question. I used to take my estimates and th use dnorm or pnorm or one of those but I can't remember what I did and I can't find my old code. thanks. -------------------------------------------------------- This is not an offer (or solicitation of an offer) to buy/sell the securities/instruments mentioned or an official confirmation. Morgan Stanley may deal as principal in or own or act as market maker for securities/instruments mentioned or may advise the issuers. This is not research and is not from MS Research but it may refer to a research analyst/research report. Unless indicated, these views are the author's and may differ from those of Morgan Stanley research or others in the Firm. We do not represent this is accurate or complete and we may not update this. Past performance is not indicative of future returns. For additional information, research reports and important disclosures, contact me or see https://secure.ms.com/servlet/cls. You should not use e-mail to request, authorize or effect the purchase or sale of any security or instrument, to send transfer instructions, or to effect any other transactions. We cannot guarantee that any such requests received via e-mail will be processed in a timely manner. This communication is solely for the addressee(s) and may contain confidential information. We do not waive confidentiality by mistransmission. Contact me if you do not wish to receive these communications. In the UK, this communication is directed in the UK to those persons who are market counterparties or intermediate customers (as defined in the UK Financial Services Authority's rules). [[alternative HTML version deleted]]