Generalized method of moments

Summary

The generalized method of moments (GMM) estimates parameters from moment conditions $E[g(X, \theta_0)] = 0$, possibly more conditions than parameters. It chooses $\theta$ to make the sample averages of the moment functions as close to zero as possible in a weighted quadratic norm. It contains the method of moments, least squares and instrumental variables estimation as special cases. It was introduced in econometrics by Lars Peter Hansen. It is a standard tool there because it does not need a full model of the data.