🏆 Homework

Maximum Likelihood Estimation of Parameters of Gamma Distribution

Answer by Muhammed Talha Kaya

Let’s consider the maximum likelihood estimation for the parameters of Gamma distribution with unknown scale parameter \(\theta\) and shape parameter \(\kappa\) based on a random sample of size n.

The probability density function of Gamma distribution with unknown parameters (\(\theta, \kappa\)) is:

\(f(x;\theta, \kappa) = \frac{1}{\theta^\kappa \Gamma(\kappa)}x^{\kappa-1}e^{-\frac{x}{\theta}} \) for \(x>0\) and \(\theta,\kappa>0\).

Then the likelihood and log-likelihood functions based on a random sample of size n are defined, respectively, as follows:

\(L(\theta, \kappa) = \frac{1}{\theta^{n\kappa} \Gamma(\kappa)^n} \big(\prod_{i}^{n} x_i\big)^{\kappa-1}e^{-\sum_{i}^{n} \frac{x_i}{\theta}} \) for \(x>0\) and \(\theta,\kappa>0\), and

\(\log(L(\theta, \kappa)) = -n \kappa\log(\theta)-n \log(\Gamma(\kappa)) + (\kappa-1)\log(\prod_{i}^{n} x_i)-\frac{\sum_{i}^{n} x_i}{\theta}\).

The partial derivatives are:

\(\frac{\partial\log(L(\theta, \kappa))}{\partial\theta }= -\frac{n \kappa}{\theta} + \frac{\sum_{i}^{n} x_i}{\theta^2}\) and

\(\frac{\partial\log(L(\theta, \kappa))}{\partial\kappa }= -n \log(\theta) - n \frac{\Gamma'(\kappa)}{\Gamma(\kappa)} + \log(\prod_{i}^{n} x_i)\).

Let \(\psi(\kappa) = \frac{\Gamma'(\kappa)}{\Gamma(\kappa)}\) denote the psi function and \(\tilde X = \big(\prod_{i}^{n} x_i\big)^{\frac{1}{n}}\), where \(n \log(\tilde X) = \log(\prod_{i}^{n} x_i)\), denote the geometric mean of the sample, then set the derivatives equal to zero:

\(\frac{\partial\log(L(\theta, \kappa))}{\partial\theta }= -\frac{n \kappa}{\theta} + \frac{\sum_{i}^{n} x_i}{\theta^2}=0 \Rightarrow \)

\(\hat{\theta}= \frac{\sum_{i}^{n} x_i}{n \hat{\kappa}} = \frac{\bar x}{\hat{\kappa}}\).

So \(\hat{\theta}_{MLE}\) depends on \(\hat{\kappa}_{MLE}\).

\(\frac{\partial\log(L(\theta, \kappa))}{\partial\kappa }= -n \log(\frac{\bar x}{\hat{\kappa}}) - n \psi(\hat{\kappa}) + n \log(\tilde X) =-n \log(\bar x) + n \log(\hat{\kappa})-n \psi(\hat{\kappa}) + n \log(\tilde X) = \log(\hat{\kappa})-\psi(\hat{\kappa}) + \log(\frac{\tilde X}{\bar x})=0\).

The last ML equation cannot be solved in closed form due to non-linear form of \(\kappa\). We need an iterative algorithm to find the root.

İbrahim Talha suggests to use Newton-Raphson algoritm to find the root of the last ML equation iteratively as follows:

\(\hat{\kappa}_{n+1} = \hat{\kappa}_{n}-\frac{f(\hat{\kappa}_{n})}{f'(\hat{\kappa}_{n})}\),

where \(f(\hat{\kappa}_{n})= \log(\hat{\kappa}_{n})-\psi(\hat{\kappa}_{n}) + \log(\frac{\tilde X}{\bar x})\), \(f'(\kappa_{n})= \frac{1}{\hat{\kappa}_{n}}-\psi'(\hat{\kappa}_{n})\) with \(\psi(\hat{\kappa}_{n}) = \frac{\Gamma'(\hat{\kappa}_{n})}{\Gamma(\hat{\kappa}_{n})}\) and \(\tilde X = \big(\prod_{i}^{n} x_i\big)^{\frac{1}{n}}\).

#import required libraries
import numpy as np
from matplotlib import pyplot as plt
import scipy.stats as stats
from scipy import special
import math
import random
#special.polygamma(1, x)

#Generate 10000 data with gamma distribution
#np.random.gamma(Kappa,Theta,Size of Data)
data = np.random.gamma(shape=2,scale=2,size=500)
#we are estimating shape parameter

#define x_tilda based on the data
def x_tilda(data):

	x_tilda = 0

	for item in data:

		x_tilda = x_tilda+ math.log(item)

	return math.exp(x_tilda*(1/np.size(data)))

x_tilda = x_tilda(data)

x_bar = np.mean(data)

#scipy.special.polygamma(n, x) = nth derivative of the psi(x) function
def psi(k_hat): 
	psi_value = special.polygamma(0, k_hat)

	return psi_value

def fd_psi(k_hat): #first derivative of psi
	fd_psi_value = special.polygamma(1, k_hat)

	return fd_psi_value

def kappa_function(k_hat,x_tilda,x_bar): #F(Kappa Hat) =? 0 

	kappa_function_result = math.log(k_hat) - psi(k_hat) + math.log(x_tilda) - math.log(x_bar)
	return kappa_function_result

def fd_kappa_function(k_hat): #first derivative of kappa_function

	fd_kappa_function_result = (1/k_hat) - fd_psi(k_hat)
	return fd_kappa_function_result

#Newthon-Raphson Method
def New_Rap(k_n,x_tilda,x_bar): #Newthon-Raphson Method will return a value closer to the root for the given initial value.

	new_k_n = k_n - (kappa_function(k_n,x_tilda,x_bar)/fd_kappa_function(k_n))

	return new_k_n

k_n = 1 # take initial kappa value 1 (k>0) 
#Initial value can be method of moment estimate:np.mean(data)**2/np.var(data) 
tolerance = 10**-5

print("\nInitial Kappa = {}".format(k_n))
print("Function Value in Initial Kappa = {}\n".format(kappa_function(k_n,x_tilda,x_bar)))


	k_n = New_Rap(k_n,x_tilda,x_bar)
	print("New Kappa = {}".format(k_n))
	print("Function Value in New Kappa = {}\n".format(kappa_function(k_n,x_tilda,x_bar)))

#Find theta_hat
theta_hat = np.mean(data)/k_n
print("Theta Hat = {}".format(theta_hat))

sort_data = np.sort(data)

plt.plot(sort_data, stats.gamma.pdf(sort_data, a = 2, scale = 2))

Initial Kappa = 1
Function Value in Initial Kappa = 0.2921396893876196

New Kappa = 1.4529760550800137
Function Value in New Kappa = 0.09694753113047727

New Kappa = 1.790591890737939
Function Value in New Kappa = 0.01943563989661845

New Kappa = 1.8965310753276743
Function Value in New Kappa = 0.0011556158803451844

New Kappa = 1.9036518903161657
Function Value in New Kappa = 4.605047558392528e-06

Theta Hat = 2.0035037029635885
'\nsort_data = np.sort(data)\n\nplt.plot(sort_data, stats.gamma.pdf(sort_data, a = 2, scale = 2))\n\nplt.show() \n'

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