Type author name/s here

Dougherty

Introduction to Econometrics,
5th edition
Chapter heading
Review: Random Variables,
Sampling, Estimation, and
Inference

© Christopher Dougherty, 2016. All rights reserved.

 SUFFICIENT CONDITION FOR CONSISTENCY

Sufficient condition for the consistency of an estimator:

(1) The estimator is unbiased.
(2) Its variance goes to zero as the sample size becomes large.

If you wish to demonstrate that an estimator is consistent, it is often possible to do so

relatively painlessly by using the following two-part sufficient condition:
(1) The estimator is unbiased. (2) Its variance goes to zero as the sample size becomes large.
1
 SUFFICIENT CONDITION FOR CONSISTENCY

Sufficient condition for the consistency of an estimator:

(1) The estimator is asymptotically unbiased.
(2) Its variance goes to zero as the sample size becomes large.

The first part of the condition may be weakened to a requirement that the estimator be
asymptotically unbiased.

2
 SUFFICIENT CONDITION FOR CONSISTENCY

0.3 n X
1 50
n = 1600 4 25
probability density function

25 10
0.2 100 5
400 2.5
1600 1.25
n = 400

0.1

n = 100

0.0
0 50 100 150 X

The sample mean may be shown to be consistent by this method. The figure illustrates the
simulation shown in the previous slideshow. The true value of m is 100. The distribution of
the sample mean is shown for various sample sizes.
3
 SUFFICIENT CONDITION FOR CONSISTENCY

0.3 E X   n X
1 50
 2
n = 1600
 X2  X 4 25
probability density function

n 25 10
0.2 100 5
400 2.5
1600 1.25
n = 400

0.1

n = 100

0.0
0 50 100 150 X

The sample mean is unbiased and its variance tends to zero as n becomes large.

4
 SUFFICIENT CONDITION FOR CONSISTENCY

n
Z X
n1
n
E Z  
n1
2
 n   2
n
Z  
2

X
  2

  n  1 2 X
 n 1  n

Consider also another estimator, Z, as defined. It is biased downwards for finite n, but
asymptotically it is unbiased and its variance tends to zero. The sufficient condition shows
that it, too, is a consistent estimator of m.
5
Copyright Christopher Dougherty 2016.

These slideshows may be downloaded by anyone, anywhere for personal use.

Subject to respect for copyright and, where appropriate, attribution, they may be
used as a resource for teaching an econometrics course. There is no need to
refer to the author.

The content of this slideshow comes from Section R.14 of C. Dougherty,

Introduction to Econometrics, fifth edition 2016, Oxford University Press.
Additional (free) resources for both students and instructors may be
downloaded from the OUP Online Resource Centre
http://www.oxfordtextbooks.co.uk/orc/dougherty5e/

Individuals studying econometrics on their own who feel that they might benefit
from participation in a formal course should consider the London School of
Economics summer school course
EC212 Introduction to Econometrics
http://www2.lse.ac.uk/study/summerSchools/summerSchool/Home.aspx
or the University of London International Programmes distance learning course
EC2020 Elements of Econometrics
www.londoninternational.ac.uk/lse.

2016.04.15