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Module 15 Moment Generating Function

The document defines and provides properties of the moment generating function (MGF). The MGF of a random variable X, denoted MX(t), is defined as the expected value of e^tx for values of t within the domain of X. The MGF can be used to generate moments of X. Two examples are provided to demonstrate calculating the MGF and moments for specific random variables.

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pankaj kumar
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
97 views

Module 15 Moment Generating Function

The document defines and provides properties of the moment generating function (MGF). The MGF of a random variable X, denoted MX(t), is defined as the expected value of e^tx for values of t within the domain of X. The MGF can be used to generate moments of X. Two examples are provided to demonstrate calculating the MGF and moments for specific random variables.

Uploaded by

pankaj kumar
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Module 15

Moment Generating Function

() Module 15 Moment Generating Function 1 / 16


X : a discrete or A.C. r.v. with p.m.f./p.d.f fX (·);
Define n   o
AX = t ∈ R : E e tX < ∞ .

Clearly 0 ∈ Ax , and thus Ax 6= φ.

Definition 1: The moment generating function (m.g.f.) of r.v. X is


defined by  
MX (t) = E e tX , t ∈ AX .

() Module 15 Moment Generating Function 1 / 16


Remark 1:
(a)
MX (0) = 1 and MX (t) > 0, ∀ t ∈ AX ;
(b) Let Y = cX + d, for some real constants c 6= 0 and
d ∈ R. Then
 
MY (t) = E e tY
 
= E e t(cX +d)
 
= e td E e ctX
nx o
td
= e MX (ct), t ∈ AY = : x ∈ AX .
c
(c) The name moment generating function to the transform
MX (t), t ∈ AX , is attributed to the fact that MX (t) can be
used to generate moments (µ0r = E (X r ) , r = 1, 2, . . .) of
r.v. X .
() Module 15 Moment Generating Function 2 / 16
Result 1:

Suppose that, for some h > 0, the m.g.f. MX (t) is finite for every
t ∈ (−h, h). Then
(a) MX (t) is differentiable any number of times in (−h, h);
(b) for each r ∈ {1, 2, . . .} , µ0r = E (X r ) is finite and
 
0 (r ) d
µr = MX (0) = MX (t) ;
dt r t=0

(c) for t ∈ (−h, h)


∞ r
X t
MX (t) = µ0r .
r!
r =0

() Module 15 Moment Generating Function 3 / 16


Proof:
(Outline of the proof for A.C. case). Fix r ∈ {1, 2, . . .}.
MX (t) = E (e tX )
Z ∞
= e tx fX (x)dx
−∞
Z ∞
d r MX (t) dr
= e tx fX (x)dx
dt r dt r −∞
Z ∞ r 
d tx
= r
e fX (x)dx
−∞ dt
Z ∞
= x r e tx fX (x)dx
−∞
 r  Z ∞
d MX (t)
= x r fX (x)dx = µ0r ,
dt r t=0 −∞
d r
where passing of derivative dt r under the integral sign can be justified

through advanced mathematical arguments.


() Module 15 Moment Generating Function 4 / 16
Also,
Z ∞
MX (t) = e tx fX (x)dx
−∞
∞
∞ X
(tx)r
Z
= fX (x)dx
−∞ r =0 r!
∞
X tr Z ∞
= x r fX (x)dx
r! −∞
r =0
∞ r
X t
= µ0r , r = 1, 2, . . . ,
r!
r =0

where interchange of integral and summation sign can be justified through


advanced mathematical arguments.

() Module 15 Moment Generating Function 5 / 16


Corollary 1:
Under the notation and assumptions of above result, let
ψX (t) = ln MX (t), t ∈ (−h, h). Then
(1)
µ01 = E (X ) = ψX (0);
(2)
and µ2 = Var(X ) = ψX (0).
Proof. We have, for t ∈ (−h, h),
(1)
(1) MX (t)
ψX (t) =
MX (t)
(1)
(1) MX (0)
ψX (0) = = µ01
MX (0)
(2) (1)
(2) MX (t)MX (t) − (MX (t))2
ψX (t) =
(MX (t))2
(2) (2) (1)
ψX (0) = MX (0) − (MX (0))2
() Module 15 Moment Generating Function 6 / 16
= µ02 − (µ01 )2 = Var(X ).

Remark 2:
(a) The function ψX (t), t ∈ (−h, h), is called the cumulant
generating function of X ;
(b) For r = 1, 2, . . .

tr
µ0r = coefficient of in Maclaurin’s series expansion
r!
of MX (t).

() Module 15 Moment Generating Function 7 / 16


Example 1:
Let X be a r.v. with p.m.f.
e −λ λx

x! , if x ∈ {0, 1, 2, . . .}
fX (x) = ,
0, otherwise

where λ > 0 is a fixed constant. Then SX = {0, 1, 2, . . .} and

MX (t) = E (e tX )
∞
−λ
X (λe t )x
= e
x!
x=0
−λ λe t
= e e
λ(e t −1)
= e ,

is finite for every t ∈ R. Thus µ0r is finite for every r ∈ {1, 2, . . .}. We
have, for t ∈ R,
() Module 15 Moment Generating Function 8 / 16
ψX (t) = ln MX (t) = λ(e t − 1), t ∈ R

(1) (2)
ψX (0) = ψX (0) = λ

⇒ E (X ) = Var(X ) = λ.

Alt.
λ2 (e t − 1)2 λ3 (e t − 1)3
MX (t) = 1 + λ(e t − 1) + + + ···
2! 3!

λ2 S 2 λ3 S 3
= 1 + λS + + + ··· ,
2! 3!
where
t2 t3
S = et − 1 = t + + + ··· .
2! 3!
() Module 15 Moment Generating Function 9 / 16
Thus
t2 2λ2 λ3 t3
 
2 λ
MX (t) = 1 + λt + (λ + λ ) + + + + ···
2! 3! (2!)2 3! 3!

E (X ) = Coefficient of t in MX (t) = λ

t2
E (X 2 ) = Coefficient of in MX (t) = λ + λ2
2!

t3
E (X 3 ) = Coefficient of in MX (t) = λ3 + 3λ2 + λ
3!

Var(X ) = E (X 2 ) − (E (X ))2 = λ.

() Module 15 Moment Generating Function 10 / 16


Example 2:
Let X be a r.v. with p.d.f.

λe −λx , if x > 0

fX (x) = ,
0, otherwise

where λ > 0 is a constant. Here SX = [0, ∞). Also

MX (t) = E (e tX )
Z ∞
= e tx fX (x)dx
−∞
Z ∞
= λ e −(λ−t)x dx
0
 t −1
= 1−
λ
is finite for every t < λ. Thus moments of all orders exist.
() Module 15 Moment Generating Function 11 / 16
t t2 tr
MX (t) = 1 + + 2 + · · · + r + · · · , −λ < t < λ
λ λ λ
tr
µ0r = coefficient of in expansion of MX (t)
r!
r!
= , r = 1, 2, . . .
λr
Alt.

(1) 1 t −2
MX (t) = 1−
λ λ
(2) 2  t −3
MX (t) = 1 −
λ2 λ
(r ) r !  t −(r +1)
MX (t) = 1 − , −λ < t < λ
λr λ
(r ) r!
µ0r = MX (0) = r , r = 1, 2, . . . .
λ
() Module 15 Moment Generating Function 12 / 16
Example 3: Let X be a r.v. with p.d.f.
1 1
fX (x) = . , −∞ < x < ∞.
π 1 + x2
For t > 0

MX (t) = E (e tX )
Z ∞
1 1
= e tx . dx
−∞ π 1 + x2
1 ∞ e tx
Z
≥ dx
π 0 1 + x2
1 ∞ tx
Z
≥ dx (e y ≥ y , ∀y > 0)
π 0 1 + x2
= ∞
⇒ MX (t) = ∞, ∀t > 0,

i.e., MX (t) is not finite on any interval (−h, h), h > 0. Note that here
E (X ) does not exists.
() Module 15 Moment Generating Function 13 / 16
Take Home Problems

1 Let X be a r.v. with p.m.f.


 cp
xp , if x ∈ {1, 2, . . . }
fX (x) = ,
0, otherwise

where p > 1 is a constant and cp is the normalizing constant. Show


that the m.g.f. of X is not finite on any interval (−h, h), h > 0. Do
the moments exist?
2 Let X be a r.v. with m.g.f.
t t
1 e2 e− 3
MX (t) = + + , t ∈ R.
2 6 3
Find P(|X | > 0) and the p.m.f. of Y = X 2 .

() Module 15 Moment Generating Function 14 / 16


Abstract of Next Module

Two r.v.s X and Y are said to have the same distribution (written as
d
X = Y ) if they have the same d.f.;
d
X = Y does not imply that X = Y ;
We will study properties of r.v.s having the same distribution.

() Module 15 Moment Generating Function 15 / 16


Thank you for your patience

() Module 15 Moment Generating Function 16 / 16

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