ECON 502 The econometric
1. Consider again a joint probability distribution, this time of random variables x and y:
y\x 0 1 2 3 4
0 0.08 0.07 0.06 0.01 0.01
1 0.06 0.10 0.12 0.05 0.02
2 0.05 0.06 0.09 0.04 0.03
3 0.02 0.03 0.00 0.03 0.04
a. Obtain E(y|x) and plot it against x. (So, repeat what you did in Problem 1 in
HW 1)
b. Are x and y statistically independent? How do you know?
c. Obtain E(E(y|x)). Show that the law of iterated expectation (i.e., E(E(y|x))=E(y)) indeed holds
in this numerical example.
DETAILED ASSIGNMENT
