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    Ananya Joshi
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    The document discusses applying the central limit theorem (CLT) to simulation noise. It states that for each person, the simulation noise has an expected value of zero over the simulation process. It also defines the variance of the simulation noise for each person as the simulation variance from a single draw divided by the number of draws. The document then says that according to a variant of the CLT, when random draws come from different populations, the variance of the sample mean is equal to the expected value of the variances of the individual draws. It concludes that this variant of the CLT can be applied such that the simulation noise averaged across people will be approximately normally distributed with mean zero and variance equal to the average simulation variance from a single

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    The document discusses applying the central limit theorem (CLT) to simulation noise. It states that for each person, the simulation noise has an expected value of zero over the simulation process. It also defines the variance of the simulation noise for each person as the simulation variance from a single draw divided by the number of draws. The document then says that according to a variant of the CLT, when random draws come from different populations, the variance of the sample mean is equal to the expected value of the variances of the individual draws. It concludes that this variant of the CLT can be applied such that the simulation noise averaged across people will be approximately normally distributed with mean zero and variance equal to the average simulation variance from a single

    Copyright:

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    Download as PDF, TXT or read online from Scribd
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    21 views1 page

    Clarification

    Uploaded by

    Ananya Joshi
    The document discusses applying the central limit theorem (CLT) to simulation noise. It states that for each person, the simulation noise has an expected value of zero over the simulation process. It also defines the variance of the simulation noise for each person as the simulation variance from a single draw divided by the number of draws. The document then says that according to a variant of the CLT, when random draws come from different populations, the variance of the sample mean is equal to the expected value of the variances of the individual draws. It concludes that this variant of the CLT can be applied such that the simulation noise averaged across people will be approximately normally distributed with mean zero and variance equal to the average simulation variance from a single

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
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    of 1

    Consider simulation noise term: p = = N [g( ) Er g( )] p 1 X _ _ N[ fgn ( ) Er gn ( )g] N p 1 X N[ sn ] N

    _ _

    Now to apply CLT, think about this is as follows; For each person, sn comes from a distribution with zero mean (expected simulation noise for each person where the expectation is over the simulation process is zero). Now for each person we need to calculate V arr [sn ] i.e. the variance of sn over the simulation process. This is Kn1 R where Kn1 is simulation variance due to a single draw. Now use a variant of CLT where if the randraws are coming from dierent populations, then the variance of the sample mean is given by En [V arr [sn ]] = En Therefore now applying CLT, p N[ K 1 X d sn ] ! N (0; ) N R Kn1 K = R R

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