Chapter 2 Parameter Estimation

Suppose $Y \sim Bin(n, \theta)$ , and $\theta \sim Be(a, b)$ , then $p(\theta\mid y) \propto \theta^{a + y - 1}(1-\theta)^{b+n-y-1}$ . Thus $\theta\mid y \sim Be(a+y, b+n-y)$ .

A $100(1 - \alpha)\%$ credible interval is any interval in the posterior that contains the parameter with probability $(1- \alpha)$ . Define a loss function $L(\theta, \hat\theta) = -U(\theta, \hat\theta)$ where $\theta$ is the parameter of interest and $\hat\theta = \hat\theta(y)$ is the estimator of $\theta$ .

Find the estimator that minimizes the expected loss: $\hat\theta_{Bayes} = \arg\min_{\hat\theta}E\left[ L(\theta, \hat\theta)\mid y\right]$ . Common estimators are:

Mean: $\hat\theta_{Bayes} = E(\theta\mid y)$ minimizes $L(\theta, \hat\theta) = (\theta, \hat\theta)^2$ .
Median: $\int_{\hat\theta}^\infty p(\theta\mid y) d\theta = \frac{1}{2}$ minimizes $L(\theta, \hat\theta) = |\theta - \hat\theta |$ .
Mode: $\hat\theta_{Bayes} = \arg\max_{\theta} p(\theta\mid y)$ is obtained by minimizing $L(\theta, \hat\theta) = -I(|\theta- \hat\theta) < \epsilon)$ as $\epsilon \rightarrow 0$ , also called maximum a posterior (MAP) estimator.

A $100(1- \alpha)\%$ credible interval is any interval $(L, U)$ such that $1 - \alpha = \int_{L}^U p(\theta\mid y) d\theta$ . Some typical intervals are

Equal-tailed: $\alpha/2 = \int_{-\infty}^L p(\theta\mid y)d\theta = \int_{U}^\infty p(\theta\mid y)d\theta$ .
One-sided: either $L = -\infty$ or $U = \infty$
Highest posterior density (HPD): $p(L\mid y) = p(U\mid y)$

A prior probability distribution, often called simply the prior, of an uncertain quantity $\theta$ is the probability distribution that would express one’s uncertainty about $\theta$ before the “data” is taken into account.

A prior $p(\theta)$ is conjugate if for $p(\theta) \in \mathcal{P}$ and $p(y\mid \theta) \in \mathcal{F}$ , $p(\theta\mid y) \in \mathcal{P}$ where $\mathcal{F}$ and $ are families of distributions.

Example: the beta distribution ( $\mathcal{P}$ ) is conjugate to the binomial distribution Discrete priors are conjugate. Mixture of conjugate priors are conjugate.

A natural conjugate prior is a conjugate prior that has the same functional form as the likelihood.

Example: the beta distribution is a natural conjugate prior since $p(\theta) \propto \theta^{a-1}(1-\theta)^{b-1}$ and $L(\theta) \propto \theta^y(1-\theta)^{n-y}$ .

Mixture of conjugate priors: Suppose $\theta \sim \sum_{i = 1}^I p_ip_i(\theta)$ , $\sum_{i=1}^I p_i = 1$ and $p_i(y) = \int p(y\mid \theta) p_i(\theta)d\theta$ , then $\theta\mid y \sim \sum_{i=1}^I p_i'p_i(\theta\mid y)$ , $p_i' \propto p_ip_i(y)$ where $p_i(\theta\mid y) = p(y \mid \theta)p_i(\theta)/p_i(y)$ .

Example: $Y \sim Bin(n, \theta)$ , $\theta \sim pBe(a_1, b_1) + (1-p)Be(a_2, b_2)$ , then $\theta\mid y \sim p'Be(a_1 + y, b_1 + n - y) + (1 - p')Be(a_2 + y, b_2 + n - y)$ with $p' = \frac{pp_1(y)}{pp_1(y) + (1-p)p_2(y)}$ , $p_i(y) = {n \choose y} \frac{Beta(a_i + y, b_i + n - y)}{Beta(a_i, b_i)}$ .

A default prior is used when a data analyst is unable or unwilling to specify an informative prior distribution.

Suppose we use $\phi = \log (\theta/(1-\theta))$ , the log odds of the parameter, and set $p(\phi) \propto 1$ , then the implied prior on $\theta$ is $\begin{aligned} p_{\theta}(\theta) \propto & 1\left|\frac{d}{d \theta} \log (\theta /[1-\theta])\right| \\ &=\frac{1-\theta}{\theta}\left[\frac{1}{1-\theta}+\frac{\theta}{[1-\theta]^{2}}\right] \\ &=\frac{1-\theta}{\theta}\left[\frac{[1-\theta]+\theta}{[1-\theta]^{2}}\right] \\ \rightarrow \quad &=\theta^{-1}[1-\theta]^{-1} \end{aligned}$ a $Be(0, 0)$ if that were a proper distribution, and is different from setting $p(\theta) \propto 1$ which results in the $Be(1,1)$ prior.

Jeffreys prior is a prior that is invariant to parameterization and is obtained via $p(\theta) \propto \sqrt{\text{det} \space \mathcal{I}(\theta)}$ where $\mathcal{I}(\theta)$ is the Fisher information.

Example: for a binomial distribution $\mathcal{I}(\theta) = \frac{n}{\theta(1-\theta)}$ so $p(\theta) \propto \theta^{-1/2} (1-\theta)^{-1/2}$ .

Improper prior: An unnormalized density, $f(\theta)$ , is proper if $\int f(\theta)d\theta = c < \infty$ , and otherwise it is improper.

Example: $Be(0, 0)$ is an improper distribution. Suppose $Y \sim Bin(n, \theta)$ , the posterior $\theta\mid y \sim Be(y, n-y)$ is proper if $0 < y < n$ .

Normal Distribution

Thm: If $Y_i \stackrel{iid}{\sim} N(\mu, s^2)$ ( $s^2$ is known), Jeffreys prior for $\mu$ is $p(\mu) \propto 1$ and the posterior is $p(\mu \mid y) \propto \exp\left(-\frac{1}{2s^2/n} [\mu^2 - 2\mu\bar y] \right) \sim N(\bar y, s^2/n)$ The natural conjugate prior is $\mu \sim N(m, C)$ and the posterior $\mu\mid y \sim N(m', C')$ where $C' = [\frac{1}{C} + \frac{n}{s^2}]^{-1}$ and $m' = C'[\frac{m}{C} + \frac{n}{s^2}\bar y]$ .

The posterior precision is the sum of the prior and observation precisions

The posterior mean is a precision weighted average of the prior and data.

Jeffrey prior/posterior are the limits of the conjugate prior/posterior as $C \rightarrow \infty$ , i.e. $\lim_{C\rightarrow \infty} N(m, C) \stackrel{d}{\rightarrow} \propto 1$ and $\lim_{C \rightarrow \infty} N(m', C') \stackrel{d}{\rightarrow} N(\bar y, s^2/n)$ .

Thm: If $Y_i \stackrel{iid}{\sim} N(m, \sigma^2)$ ( $m$ is known), Jeffery prior for $\sigma^2$ is $p(\sigma^2) \propto 1/\sigma^2$ and the posterior is $p(\sigma^2\mid y) \propto (\sigma^2)^{-n/2-1}\exp\left(-\frac{1}{2\sigma^2}\sum_{i=1}^n [y_i - m]^2 \right) \sim IG(n/2, \sum_{i=1}^n [y_i - m]^2).$ The natural conjugate prior is $\sigma^2 \sim IG(a, b)$ and the posterior $\sigma\mid y \sim IG(a + n/2, b + \sum_{i=1}^n [y_i - m]^2/2)$ .

JAGS

# Y ~ Bin(n, theta), theta ~ Be(1, 1), we observe Y = 3 successes out of 10 attempts
library(rjags)
model = "
model
{
y ~ dbin(theta,n)   # notice p then n
theta ~ dbeta(a,b)
}"

dat = list(n=10, y=3, a=1, b=1)
m = jags.model(textConnection(model), dat)

r = coda.samples (m, "theta", n.iter=1000)
summary(r)
plot(r)

Stan

library(rstan)
model = "
data {
int<lower=0> n; // define range and type
int<lower=0> a; // and notice semicolons
int<lower=0> b;
int<lower=0, upper=n> y;
}
parameters {
real<lower=0, upper=1> theta;
}
model {
y ~ binomial(n, theta) ;
theta ~ beta(a, b) ;
}
"

dat = list(n=10, y=3, a=1, b=1)
m = stan_model(model_code = model) # Only needs to be done once
r = sampling(m, data = dat)

## Inference for Stan model: 7f934cc8d471003538635fa74104a81a.
## 4 chains, each with iter=2000; warmup=1000; thin=1; 
## post-warmup draws per chain=1000, total post-warmup draws=4000.
## 
##        mean se_mean   sd   2.5%   25%   50%   75% 97.5% n_eff Rhat
## theta  0.33    0.00 0.13   0.11  0.23  0.32  0.42  0.62  1538    1
## lp__  -8.18    0.02 0.75 -10.48 -8.36 -7.90 -7.70 -7.64  1301    1
## 
## Samples were drawn using NUTS(diag_e) at Fri Aug  5 13:54:24 2022.
## For each parameter, n_eff is a crude measure of effective sample size,
## and Rhat is the potential scale reduction factor on split chains (at 
## convergence, Rhat=1).

plot(r)

## ci_level: 0.8 (80% intervals)

## outer_level: 0.95 (95% intervals)