Likelihood and its use in Parameter Estimation and Model Comparison

Parameter estimation and model fitting underlie many statistical procedures. Whether the objective is to examine central tendency or the slope of a regression line, an estimation method must be used. Likelihood is the basis for parameter estimation, for determining the best relative fit among several statistical models, and for significance testing. In this review, the concept of Likelihood is explained and applied computation examples are given. The examples provided serve to illustrate how likelihood is relevant, and related to, the most frequently applied test statistics (Student’s t-test, ANOVA). Additional examples illustrate the computation of Likelihood(s) using common population model assumptions (e.g., normality) and alternative assumptions for cases where data are non-normal. To further describe the interconnectedness of Likelihood and the Likelihood Ratio with modern test statistics, the relationship between Likelihood, Least Squares Modeling, and Bayesian Inference are discussed. Finally, the advantages and limitations of Likelihood methods are listed, alternatives to Likelihood are briefly reviewed, and R code to compute each of the examples in the text is provided.