The idea is quite simple. Imagine two random variables $Y$ and $X$. (For more information about the exact definitions of what a random variable is, the Wikipedia page has a lot of useful information.) Given their observed realisations $\{(Y_i,X_i):i=1,...,n\}$, the goal is to test if the conditional average of $Y$ is statistically different from its unconditional average. We can approximate the former by estimating the mean of $Y$ for different parts of $X$ distribution. For instance, we can test if expectations of $Y$ d...

Marcin Wolski, PhD

Economist

European Investment Bank

E-mail: M.Wolski (at) eib.org

Phone: +352 43 79 88708

View my profile

IDEAS/RePEc