Template:Lognormal distribution maximum likelihood estimation

Maximum Likelihood Estimation

As it was outlined in Chapter 3, maximum likelihood estimation works by developing a likelihood function based on the available data and finding the values of the parameter estimates that maximize the likelihood function. This can be achieved by using iterative methods to determine the parameter estimate values that maximize the likelihood function. However, this can be rather difficult and time-consuming, particularly when dealing with the three-parameter distribution. Another method of finding the parameter estimates involves taking the partial derivatives of the likelihood equation with respect to the parameters, setting the resulting equations equal to zero, and solving simultaneously to determine the values of the parameter estimates. The log-likelihood functions and associated partial derivatives used to determine maximum likelihood estimates for the lognormal distribution are covered in Appendix C.