Of all the different linear combinations of Z that we might choose, Xn is the most efficient in the sense that the asymptotic covariance matrix of an IV estimator based on a linear combination ZF is smaller when F = (Z Z)-1Z X than with any other F that uses all L columns of Z; a fortiori, this result eliminates linear combinations obtained by dropping any columns of Z.3 We close this section with some practical considerations in the use of the instrumental variables estimator. By just multiplying out the matrices in the expression,