On the Bias of the Maximum Likelihood Estimator for the Two-Parameter Lomax Distribution

David Giles, Hui Feng and Ryan T. Godwin

No 1104, Econometrics Working Papers from Department of Economics, University of Victoria

Abstract: The Lomax (Pareto II) distribution has found wide application in a variety of fields. We analyze the second-order bias of the maximum likelihood estimators of its parameters for finite sample sizes, and show that this bias is positive. We derive an analytic bias correction which reduces the percentage bias of these estimators by one or two orders of magnitude, while simultaneously reducing relative mean squared error. Our simulations show that this analytic bias correction outperforms a correction based on the parametric bootstrap. Three examples with actual data illustrate the application of our methods.

Keywords: Maximum likelihood estimator; bias reduction; Lomax distribution; Pareto II distribution; bootstrap (search for similar items in EconPapers)
JEL-codes: C13 C15 C16 C53 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2011-04-07
New Economics Papers: this item is included in nep-ecm and nep-ore
Note: ISSN 1485-6441
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Persistent link: https://EconPapers.repec.org/RePEc:vic:vicewp:1104

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