Paper 3, Section II, J

Principles of Statistics | Part II, 2016

Let X1,…,XnX_{1}, \ldots, X_{n} be i.i.d. random variables from a N(θ,1)N(\theta, 1) distribution, θ∈R\theta \in \mathbb{R}, and consider a Bayesian model θ∼N(0,v2)\theta \sim N\left(0, v^{2}\right) for the unknown parameter, where v>0v>0 is a fixed constant.

(a) Derive the posterior distribution Π(⋅∣X1,…,Xn)\Pi\left(\cdot \mid X_{1}, \ldots, X_{n}\right) of θ∣X1,…,Xn\theta \mid X_{1}, \ldots, X_{n}.

(b) Construct a credible set Cn⊂RC_{n} \subset \mathbb{R} such that

(i) Π(Cn∣X1,…,Xn)=0.95\Pi\left(C_{n} \mid X_{1}, \ldots, X_{n}\right)=0.95 for every n∈Nn \in \mathbb{N}, and

(ii) for any θ0∈R\theta_{0} \in \mathbb{R},

Pθ0N(θ0∈Cn)→0.95 as n→∞,P_{\theta_{0}}^{\mathbb{N}}\left(\theta_{0} \in C_{n}\right) \rightarrow 0.95 \quad \text { as } n \rightarrow \infty,

where PθNP_{\theta}^{\mathbb{N}} denotes the distribution of the infinite sequence X1,X2,…X_{1}, X_{2}, \ldots when drawn independently from a fixed N(θ,1)N(\theta, 1) distribution.

[You may use the central limit theorem.]

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