 Inverse-variance weighting

Inverse-variance weighting combines estimates of the same quantity by giving a more precise estimate a larger weight. Suppose $X_i$ are independent, unbiased estimators of $\theta$, with known variances $0<{\sigma }_i^2<\infty$. For normalized weights,The inverse is taken after squaring the standard uncertainty: twice the standard uncertainty gives one quarter as much weight. The corresponding weighted least squares criterion is ${\sum }_i(X_i-\theta {)}^2/{\sigma }_i^2$; differentiating it with respect to $\theta$ gives the same weighted arithmetic mean.^[ref]

The optimality statement is precise. Any linear unbiased estimator ${\sum }_i{a}_i{X}_i$ requires ${\sum }_i{a}_i=1$. By the Cauchy-Schwarz inequality,Equality holds for the displayed weights. Thus they minimize variance among linear unbiased combinations under these assumptions; a normal distribution is not needed for that proof.

For an original example, combine observed values 10 and 14 with standard uncertainties 1 and 2 in the same units. The normalized weights are $0.8$ and $0.2$, giving estimate $10.8$, variance $0.8$ and standard uncertainty approximately $0.894$. Equal weights give 12 and standard uncertainty $\sqrt{1.25}\approx 1.118$.

Correlated errors change the problem. A contribution common to every reading survives every weighting whose coefficients sum to one; precision limits of weighting correlated repeats derives the resulting floor. More generally, use the full covariance matrix and generalized least squares rather than treating correlated readings as independent.^[ref] Uncertainty in estimated inverse-variance weights is another limitation: variances estimated from the same data are not fixed known quantities, and an accidentally tiny estimated variance does not justify arbitrary confidence.