MATLAB: How does the Box-Cox Transformation in Matlab work

box-coxlog-likelihood functionnormal data

What is the explicitly Log-Likelihood Function (LLF) maximized?
Are the variance and mean values computed from the data?

Best Answer

Hi,
The log-likelihood function being maximized with respect to parameter λ for the Box-Cox transformation is following:
-(n/2)*log(σ(Y)^2)+(λ-1)*(∑log(y_i)), where Y represents the data transformed using the Box-Cox transformation and n represents the number of data points.
The equations for the Box-Cox transformation can be found in the following link: http://www.mathworks.com/help/finance/boxcox.html
You can also learn more about the implementation of the Box-Cox transformation in MATLAB by studying the code for 'boxcox.m':
>> edit boxcox.m
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