Take the model Y X0e with E[Ze] 0. Let eei Yi X0 i e where e is consistent for (e.g.

Take the model Y Æ X0¯Åe with E[Ze] Æ 0. Let eei Æ Yi ¡ X0 i

e¯ where e¯ is consistent for ¯

(e.g. a GMMestimator with some weight matrix). An estimator of the optimal GMMweight matrix is cW Æ

Ã

1 n

Xn iÆ1 Zi Z0 i ee2 i

!¡1

.

Show that cW ¡!

p

­¡1 where ­Æ E

£

Z Z0e2¤

.