Homework 8 (Due on 6/10(Wed.

))

1. Please derive the result of Theorem 7.2.1,

Var(y|y > c) = σ2 (1 − λ(c′ )(λ(c′ ) − c′ ),

c−μ
where c′ = σ .

Answer. To obtain the above result, we first derive the second moment of y condi-
tional on y > c,
Z ∞
2
E(y |y > c) = (zσ + μ)2 f (y|y > c)dy
′
Zc ∞
= (z2 σ2 + 2zσμ + μ2 )f (y|y > c)dy
c′
Z ∞ Z ∞ Z ∞
2 2
= z σ f (y|y > c)dy + 2zσμf (y|y > c)dy + μ2 f (y|y > c)dy
c′ c′ c′
∞ 1 ∞ 1
σ φ(z) σ φ(z)
Z Z
= z2 σ 2 R c−μ σdz + 2zσμ R c−μ σdz
c′ 1− σ
φ(z)dz c′ 1− σ
φ(z)dz
∞ ∞
∞ 1
σ φ(z)
Z
+ μ2 R c−μ σdz = I1 + I2 + I3 .
c′ 1− σ
φ(z)dz
∞

I1 follows that
∞ 1 ∞
σ φ(z) σ2
Z Z
2 2
z σ R c−μ σdz = z2 φ(z)dz
c′ 1 − ∞σ φ(z)dz 1 − Φ(c′ ) c′
Z ∞
σ2
= zzφ(z)dz
1 − Φ(c′ ) c′
Z ∞
σ2 ∞ σ2
= −zφ(z) c′ +

φ(z)dz
1 − Φ(c′ ) 1 − Φ(c′ ) c′
σ2 (c′ φ(c′))
= + σ2 .
1 − Φ(c′ )
The third equality holds by using integration by parts with u = z, dv = zφ(z)dz and
v = −φ(z). I2 and I3 follow the results of deriving the first moment,
∞ 1 ∞ 1
σ φ(z) σ φ(z) φ(c′ )
Z Z
2zμ c−μ σdz =2σμ z c−μ σdz = 2σμ ,
c′
R
c′
R 1 − Φc′
1− ∞
σ
φ(z)dz 1− ∞
σ
φ(z)dz
∞ 1
σ φ(z)
Z
μ2 R c−μ σdz =μ2 .
c′ 1− σ
φ(z)dz
∞

We can have that

2
Var(y|y > c) =E(y2 |y > c) − E(y|y > c)
=μ2 + 2σμλ (c′ ) + σ2 c′ λ (c′ ) + σ2 − (μ + σλ (c′ ))2
=σ2 (1 − λ(c′ )(λ(c′ ) − c′ ).

1
2. Please verify that

λ′ (v) =λ(v)(1 − λ(v)),

λ′′ (v) =(1 − 2λ(v))λ(v)(1 − λ(v)).

Answer.

−1
∂λ(v) ∂ exp(v) 1 + exp(v) exp(v) exp(v)2 2
= = −
2 = λ(v) − λ(v) ,
∂v ∂v 1 + exp(v) 1 + exp(v)
∂2 λ(v) ∂ ∂λ(v)
2
= (λ(v) − λ(v)2 ) = λ(v) − λ(v)2 − 2λ(v) = λ(v) − λ(v)2 − 2λ(v)2 + 2λ(v)3.
∂v ∂v ∂v

3. Please derive the first moment (E(y|y < c)) of the truncated model where it is
truncated above.
Answer. Since y ∼ N(μ, σ2 ), we can obtain that

1
fy (y) = φ(z)
Z ∞ σ
Z ∞ Z ∞
1
fy (y)dy = φ(z) σdz = φ(z)dz
c−μ
σ
c−μ
σ
σ c−μ
σ

y−μ
where z = σ . By substituting the above results into fy (y|y < c), we have
1
φ(z)
fy (y|y < c) = Rσ∞ .
1 − c−μ φ(z)dz
σ

Then the expectation of y conditional on y < c is as follows

c 1
φ(z)
Z
E(y|y < c) = (zσ + μ) Rσ∞ dy
−∞ 1 − c−μ φ(z)dz
σ
c−μ
1
φ(z)
Z
σ
= (zσ + μ)Rσ∞ σdz
−∞ 1 − c−μ φ(z)dz
σ
Z c−μ Z c−μ
σ φ(z) σ σ
=μ dz + zφ(z)dz
−∞ Φ(c ) Φ(c′ ) −∞
′
Z c−μ
σ σ ∂ 1
=μ + − √ exp (−z2 / 2)dz
Φ(c′ ) −∞ ∂z 2π
!
σ 1 2 c′
=μ + −√ exp (−z / 2)|−∞
Φ(c′ ) 2π
σφ(c′ )
=μ − .
Φ(c′ )