Generalized Method of Moments (GMM)

The Generalized Method of Moments (GMM) is a statistical technique used to estimate parameters in models by utilizing the relationships between variables, known as moments. Instead of relying solely on a specific distribution, GMM leverages available data to form estimates that match these moments, which can be averages or variances. This method is flexible and can handle complex models, making it popular in economics and finance for analyzing data when traditional methods may be less effective. GMM provides a way to draw conclusions from data while accounting for the uncertainty and variability present in real-world situations.