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Moment Generation Function

1. A moment generating function (MGF) is defined as the expected value of e raised to the power of tx, where t is a parameter and x is a random variable. 2. The MGF uniquely characterizes the distribution of a random variable and can be used to find properties such as the mean and variance. 3. Key properties of MGFs include that the MGF of a linear transformation of a random variable can be derived from the original MGF. The MGF of a sum of independent random variables is the product of their individual MGFs. 4. Examples are provided of deriving the distributions of functions of random variables using their MGFs, including the normal, gamma,

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270 views

Moment Generation Function

1. A moment generating function (MGF) is defined as the expected value of e raised to the power of tx, where t is a parameter and x is a random variable. 2. The MGF uniquely characterizes the distribution of a random variable and can be used to find properties such as the mean and variance. 3. Key properties of MGFs include that the MGF of a linear transformation of a random variable can be derived from the original MGF. The MGF of a sum of independent random variables is the product of their individual MGFs. 4. Examples are provided of deriving the distributions of functions of random variables using their MGFs, including the normal, gamma,

Uploaded by

Azwan Mahmud
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Use of moment generating

functions

Definition
Let X denote a random variable with probability
density function f(x) if continuous (probability mass
function p(x) if discrete)
Then
mX(t) = the moment generating function of X

E etX

etx f x dx if X is continuous

e p x

tx

if X is discrete

The distribution of a random variable X is described by


either
1. The density function f(x) if X continuous (probability mass function p(x) if
X discrete), or
2. The cumulative distribution function F(x), or
3. The moment generating function mX(t)

Properties
1. mX(0) = 1
2. mXk 0 k th derivative of mX t at t 0.

k E X

k E X
3.

x f x dx
x p x
k

X continuous
X discrete

k k
2 2 3 3
mX t 1 1t t t L t L .
2!
3!
k!

4. Let X be a random variable with moment


generating function mX(t). Let Y = bX + a
Then mY(t) = mbX + a(t)
= E(e [bX + a]t) = eatmX (bt)
5. Let X and Y be two independent random variables
with moment generating function mX(t) and mY(t) .

Then mX+Y(t) = mX (t) mY (t)

6. Let X and Y be two random variables with


moment generating function mX(t) and mY(t)
and two distribution functions FX(x) and
FY(y) respectively.
Let mX (t) = mY (t) then FX(x) = FY(x).
This ensures that the distribution of a random
variable can be identified by its moment
generating function

M. G. F.s - Continuous distributions

M. G. F.s - Discrete distributions

Moment generating function of the


gamma distribution

mX t E etX

tx
e
f x dx

where

1 x
x e

f x

x0
x0

e f x dx

mX t E e

tX

tx

1 x
e
x e dx

0

1 t x

x e
dx

0
tx

using

or

b a a 1 bx
0 a x e dx 1

a
a 1 bx
0 x e dx ba

then

1 t x
mX t
x e
dx

Moment generating function of the


Standard Normal distribution

mX t E etX
where

tx
e
f x dx

1
f x
e
2

x2

thus

mX t

tx

1
e
2

x2

dx

1
e
2

x2
tx
2

dx

We will use

mX t

t2
2

1
e
2

1
e
2 b

1
e
2

x2
tx
2

x 2 2 tx

1
e
2

2
xa

2 b2

dx 1

dx

dx

x 2 2 tx t 2

t2
2

e dx e

t2
2

1
e
2

2
x t

dx

Note:

2
3
4
x
x
x
e x 1 x L
2! 3! 4!
2

t t

t2
2
2 2
t

2
mX t e 1

L
2
2!
3!
2

2m

t
t
t
t
1 2 3 L m L
2 2 2! 2 3!
2 m!
Also

2 2 3 3
mX t 1 1t t t L
2!
3!

Note:

2
3
4
x
x
x
e x 1 x L
2! 3! 4!
2

t t

t2
2
2 2
t

2
mX t e 1

L
2
2!
3!
2

Also

2m

t
t
t
t
1 2 3 L m L
2 2 2! 2 3!
2 m!
2 2 3 3
mX t 1 1t t t L
2! 3!

k k th moment

x k f x dx

Equating coefficients of tk, we get

k 0 if k is odd and
2 m
1
for k 2m then m
2 m ! 2m !
hence 1 0, 2 1, 3 0, 4 3

Using of moment generating


functions to find the distribution of
functions of Random Variables

Example
Suppose that X has a normal distribution with
mean and standard deviation .
Find the distribution of Y = aX + b
Solution:
2t 2
t
mX t e 2
2
2 at

maX b t e mX at e e
bt

bt

at

2 a 2t 2
a b t
2

= the moment generating function of the normal

distribution with mean a + b and variance a22.

Thus Y = aX + b has a normal distribution with


mean a + b and variance a22.
Special Case: the z transformation

X 1

Z
X
aX b

1

Z a b
0

2
1
2
2 2
Z a 2 1

Thus Z has a standard normal distribution .

Example
Suppose that X and Y are independent each having a
normal distribution with means X and Y , standard
deviations X and Y
Find the distribution of S = X + Y

Solution:
mX t e
mY t e

X2 t 2
X t
2
Y2 t 2
Y t
2

Now

mX Y t mX t mY t e

X2 t 2
X t
2

Y2 t 2
Y t
2

or

m X Y t e

X X

2
X

Y2 t 2
2

= the moment generating function of the

normal distribution with mean X + Y and


2
2
variance X Y

Thus Y = X + Y has a normal distribution


2
2
with mean X + Y and variance X Y

Example
Suppose that X and Y are independent each having a
normal distribution with means X and Y , standard
deviations X and Y
Find the distribution of L = aX + bY

Solution:
mX t e

X t

X2 t 2

mY t e

Now

Y2 t 2
Y t
2

maX bY t maX t mbY t mX at mY bt


e

X2 at
X at
2

Y2 bt
Y bt
2

or

t
2

maX bY t e

a X b X

2
X

b 2 Y2 t 2
2

= the moment generating function of the

normal distribution with mean aX + bY


2 2
2 2
and variance a X b Y

Thus Y = aX + bY has a normal


distribution with mean aX + BY and
2 2
2 2
variance a X b Y

Special Case:
a = +1 and b = -1.
Thus Y = X - Y has a normal distribution
with mean X - Y and variance

X 1 Y X Y
2

Example (Extension to n independent RVs)


Suppose that X1, X2, , Xn are independent each having a
normal distribution with means i, standard deviations i
(for i = 1, 2, , n)
Find the distribution of L = a1X1 + a1X2 + + anXn

Solution:
mX i t e
Now

i2t 2
i t
2

(for i = 1, 2, , n)

ma1 X1 L an X n t ma1 X1 t L man X n t


mX1 a1t L mX n ant
e

12 a1t
1 a1t
2

L e

n2 an t
n an t
2

or

ma1 X1 L an X n t e

a11 ... an n

2 2
2 2
1 1 ... an n

= the moment generating function of the


normal distribution with mean a11 ... an n
2 2
2 2
and variance a1 1 ... an n
Thus Y = a1X1 + + anXn has a normal
distribution with mean a11 + + ann and
2 2
2 2
a1 1 ... an n
variance

Special case:
1
a1 a2 L an
n
1 2 L n

12 12 L 12 2
In this case X1, X2, , Xn is a sample from a
normal distribution with mean , and standard
deviations and
1
L X1 X 2 L X n
n

X the sample mean

Thus

Y x a1 x1 ... an xn

n x

x1 ... 1

has a normal distribution with mean


x a11 ... an n
1 ... 1
n
n
and variance

x2 a12 12 ... an2 n2

2
...
n

1
1
2
n
n
n

2
n

Summary
If x1, x2, , xn is a sample from a normal
distribution with mean , and standard
deviations then x the sample mean
has a normal distribution with mean

x
and variance


n
2
x

standard deviation x
n

Sampling distribution
of x

Population

The Central Limit theorem


If x1, x2, , xn is a sample from a distribution
with mean , and standard deviations then
if n is large x the sample mean
has a normal distribution with mean

x
and variance


n
2
x

standard deviation x
n

Proof: (use moment generating functions)


We will use the following fact:
Let
m1(t), m2(t),
denote a sequence of moment generating functions
corresponding to the sequence of distribution
functions:
F1(x) , F2(x),
Let m(t) be a moment generating function
corresponding to the distribution function F(x) then
if
lim mi t m t for all t in an interval about 0.
i

then lim Fi x F x for all x.


i

Let x1, x2, denote a sequence of independent


random variables coming from a distribution with
moment generating function m(t) and distribution
function F(x).
Let Sn = x1 + x2 + + xn then
mSn t mx1 x2 L xn t =mx1 t mx2 t L mxn t
= m t

x1 x2 L xn S n
now x

n
n
t
t
or mx t m 1 t mSn m
Sn
n
n
n

x
n
n
Let z

then mz t e

and ln mz t

nt
mx


nt
m

t
n

t n ln m

t
t2
Let u
or n
and n 2 2
u
u
n
t

Then ln mz t

t
n

t n ln m

n
t 2
t2
2 2 2 ln m u
u u
t 2 ln m u u
2

u2

Now lim ln mz t
n

lim ln
u 0

mz t

ln m u u
t2
2 lim
u 0
u2

t2
2 lim
u 0

m u

m u
2u

using L'Hopital's rule

m u m u m u
2

t
2 lim
u 0

m u
2

using L'Hopital's ru

m u m u m u
m u

t
2 lim
u 0

t m 0 m 0
2

using L'Hopital's rule again

t E x E xi
2

2
2

2
i

thus lim ln mz t
n

t2

2
2

and lim mz t e
n
2

t2
2

Now m t e

t2
2

Is the moment generating function of the standard


normal distribution
Thus the limiting distribution of z is the standard
normal distribution
i.e. lim Fz x
n

1
e
2

u2

du

Q.E.D.

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