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Unformatted text preview: − f Y  X , Z y  x , z f Z  X z  x d z ∙ Intuitively, we average out z but it must be a weighted average, where the weights depend on the conditional density of Z given X . 15 ∙ Here is a useful way of thinking generally about conditional distributions. Suppose Y is a random variable – say, individual earnings. Then it has some distribution in the population. When we study the conditional distribution of Y given a variable X – such as education – we are essentially partitioning the population based on the possible values of X . For each outcome x , we can study the distribution of Y . This gives us a set of conditional distributions, and we are interested in how these distributions depend on x . 16 1 . 2 . Conditional Distributions and Independence ∙ It is easily seen by the definition of the conditional density that Y and X are independent if and only if f Y  X y  x f Y y , all x and y This follows because independence is the same as f X , Y x , y f X x f Y y for all x and y . 17 ∙ The requirement f Y  X y  x f Y y is actually is more intuitive as a definition of independence: knowing the outcome on X has no affect on the probabilities we assign to different outcomes on Y . ∙ If Y and X are dependent, then (at least sometimes) knowing the value of X changes the probability of events involving Y . 18 EXAMPLE : Suppose Y is a Bernoulli p random variable indicator whether an adult in a large population is employed. Without knowing anything about individuals in the population, we assign p P Y 1 as the employment probability. But suppose we can observe X , the highest grade completed (and, say, assume this is recorded as the values 0,1,2,...,20 ). If the probability of employment changes as X changes, then Y and X are dependent. 19 ∙ A useful shorthand to denote that the conditional distribution of Y does not depend on X is D Y  X D Y , where D Y is shorthand for the unconditional distribution. ∙ An important extension is the notion of conditional independence . Sometimes two sets of random vectors are dependent, but they become independent when a third set of variables is conditioned on. In particular, suppose D Y  X , Z D Y  X . Then we say Y and Z are independent conditional on X . 20 ∙ Spelled out in terms of conditional densities, f Y  X , Z y  x , z f Y  X y  x , all x , y , and z ∙ This notion is very important in the literatures on program evaluation; a related notion is (implicitly) used in multiple regression analysis. 21 ∙ Once we have a conditional density, say f Y  X y  x , we can compute conditional probabilities of events that explicitly depend on X . So, if X is a scalar, we can compute, say, P Y ≤ 2 X  X x when X x . This is just F Y  X 2 x  x . Notice how x appears in two places in general.appears in two places in general....
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 Fall '12
 Jeff
 Probability theory, CDF, conditional distribution, conditional density

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