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Derive the MSE-optimal variance divisor

For nn independent normal draws, consider estimating the variance by σ^2=ci(XiXˉ)2=cSS\hat\sigma^2 = c\sum_i (X_i - \bar X)^2 = c\,\text{SS} for a constant cc.

Using E[SS]=(n1)σ2\mathbb{E}[\text{SS}] = (n-1)\sigma^2 and Var(SS)=2(n1)σ4\text{Var}(\text{SS}) = 2(n-1)\sigma^4, find the cc that minimizes MSE and show it corresponds to dividing by n+1n+1.

Your answer

This one is open-ended. Work it through, then check your reasoning against the full solution.

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