Gauss–Markov theorem

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This article is not about Gauss–Markov processes.

Overview

In statistics, the Gauss–Markov theorem, named after Carl Friedrich Gauss and Andrey Markov, states that in a linear model in which the errors have expectation zero and are uncorrelated and have equal variances, a best linear unbiased estimator (BLUE) of the coefficients is given by the least-squares estimator. The errors are not assumed to be normally distributed, nor are they assumed to be independent (but only uncorrelated — a weaker condition), nor are they assumed to be identically distributed (but only having zero mean and equal variances).

Statement

Suppose we have

<math>Y_i=\sum_{j=1}^{K}\beta_j X_{ij}+\varepsilon_i</math>

for i = 1, . . ., n, where β_j are non-random but unobservable parameters, X_ij are non-random and observable (called the "explanatory variables"), ε_i are random , and so Y_i are random. The random variables ε_i are called the "errors" (not to be confused with "residuals"; see errors and residuals in statistics). Note that to include a constant in the model above, one can choose to include the X_iK = 1.

The Gauss–Markov assumptions state that

• <math>{\rm E}\left(\varepsilon_i\right)=0,</math>
• <math>{\rm Var}\left(\varepsilon_i\right)=\sigma^2<\infty,</math>

(i.e., all errors have the same variance; that is "homoscedasticity"), and

• <math>{\rm Cov}\left(\varepsilon_i,\varepsilon_j\right)=0</math>

for <math>i\not=j</math>; that is "uncorrelatedness." A linear estimator of β_j is a linear combination

<math>\widehat\beta_j = c_{1j}Y_1+\cdots+c_{nj}Y_n</math>

in which the coefficients c_ij are not allowed to depend on the earlier coefficients β, since those are not observable, but are allowed to depend on X, since this data is observable, and whose expected value remains β_j even if the values of X change. (The dependence of the coefficients on X is typically nonlinear; the estimator is linear in Y and hence in ε which is random; that is why this is "linear" regression.) The estimator is unbiased iff

<math>{\rm E}(\widehat\beta_j)=\beta_j.\,</math>

Now, let <math>\sum_{j=1}^K\lambda_j\beta_j</math> be some linear combination of the coefficients. Then the mean squared error of the corresponding estimation is defined as

<math>{\rm E} \left(\sum_{j=1}^K\lambda_j(\widehat\beta_j-\beta_j)^2\right)</math>

i.e., it is the expectation of the square of the difference between the estimator and the parameter to be estimated. (The mean squared error of an estimator coincides with the estimator's variance if the estimator is unbiased; for biased estimators the mean squared error is the sum of the variance and the square of the bias.) A best linear unbiased estimator of β is the one with the smallest mean squared error for every linear combination λ. This is equivalent to the condition that

<math>{\rm Var}(\widehat\beta)-{\rm Var}(\tilde\beta)</math>

is a positive semi-definite matrix for every other linear unbiased estimator <math>\tilde\beta</math>.

The ordinary least squares estimator (OLS) is the function

<math>\widehat\beta=(X^{T}X)^{-1}X^{T}Y</math>

of Y and X that minimizes the sum of squares of residuals

<math>\sum_{i=1}^n\left(Y_i-\widehat{Y}_i\right)^2=\sum_{i=1}^n\left(Y_i-\sum_{j=1}^K\widehat\beta_j X_{ij}\right)^2.</math>

(It is easy to confuse the concept of error introduced early in this article, with this concept of residual. For an account of the differences and the relationship between them, see errors and residuals in statistics).

The theorem now states that the OLS estimator is a BLUE. The main idea of the proof is that the least-squares estimator isuncorrelated with every linear unbiased estimator of zero, i.e., with every linear combination <math>a_1Y_1+\cdots+a_nY_n</math> whose coefficients do not depend upon the unobservable β but whose expected value is always zero.

Generalized least squares estimator

The GLS or Aitken estimator extends the Gauss-Markov Theorem to the case where the error vector has a non-scalar covariance matrix - the Aitken estimator is also a BLUE.

See also

• Independent and identically-distributed random variables
• Linear regression
• Measurement uncertainty
• Best linear unbiased prediction

External links

• Earliest Known Uses of Some of the Words of Mathematics: G (brief history and explanation of its name)
• Proof of the Gauss Markov theorem for multiple linear regression (makes use of matrix algebra)
• A Proof of the Gauss Markov theorem using geometry

References

• Plackett, R.L. (1950) "Some Theorems in Least Squares", Biometrika 37: 149-157

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