Maximum Likelihood Estimation

A method for estimating the parameters of the population from which sample data was drawn. For all possible parameters, compute the probability of observing the sample statistic. The maximum likelihood estimate is the parameter associated with the highest probability. For example, suppose someone observes a cab numbered 23 and wishes to estimate the number of cabs in the entire fleet. It is also known that the taxi company numbers its cabs from 1 to the total number of cabs in the fleet. The maximum likelihood estimate is 23 because there is a 0 percent probability that the number of cabs is less than 23 and a less than 1/23 chance that the number of cabs is any number greater than 23.

Glossary * M