It is winter 2022 and my PhD cohort has moved on the second quarter of our first year statistics courses. This means we’ll be learning about generalised linear models in our applied course, asymptotic statistics in our theory course and conditional expectations and martingales in our probability course.

In the first week of our probability course we’ve been busy defining and proving the existence of the conditional expectation. Our approach has been similar to how we constructed the Lebesgue integral in the previous course. Last quarter, we first defined the Lebesgue integral for simple functions, then we used a limiting argument to define the Lebesgue integral for non-negative functions and then finally we defined the Lebesgue integral for arbitrary functions by considering their positive and negative parts.

Our approach to the conditional expectation has been similar but the journey has been different. We again started with simple random variables, then progressed to non-negative random variables and then proved the existence of the conditional expectation of any arbitrary integrable random variable. Unlike the Lebesgue integral, the hardest step was proving the existence of the conditional expectation of a simple random variable. Progressing from simple random variables to arbitrary random variables was a straight forward application of the monotone convergence theorem and linearity of expectation. But to prove the existence of the conditional expectation of a simple random variable we needed to work with projections in the Hilbert space .

Unlike the Lebesgue integral, defining the conditional expectation of a simple random variable is not straight forward. One reason for this is that the conditional expectation of a random variable need not be a simple random variable. This comment was made off hand by our Professor and sparked my curiosity. The following example is what I came up with. Below I first go over some definitions and then we dive into the example.

## A simple random variable with a conditional expectation that is not simple

Let be a probability space and let be a sub--algebra. The ** conditional expectation** of an integrable random variable is a random variable that satisfies the following two conditions:

- The random variable is -measurable.
- For all , , where is the indicator function of .

The conditional expectation of an integrable random variable is unique and always exists. One can think of as the expected value of given the information in .

A ** simple random variable** is a random variable that take only finitely many values. Simple random variables are always integrable and so always exists but we will see that need not be simple.

Consider a random vector uniformly distributed on the square . Let be the unit disc . The random variable is a simple random variable since equals if and equals otherwise. Let the -algebra generated by . It turns out that

.

Thus is not a simple random variable. Let . Since is a continuous function of , the random variable is -measurable. Thus satisfies condition 1. Furthermore if , then for some measurable set . Thus equals if and only if and . Since is uniformly distributed we thus have

.

The random variable is uniformly distributed on and thus has density . Therefore,

.

Thus and therefore equals . Intuitively we can see this because given , we know that is when and that is otherwise. Since is uniformly distributed on the probability that is in is . Thus given , the expected value of is .

## An extension

The previous example suggests an extension that shows just how “complicated” the conditional expectation of a simple random variable can be. I’ll state the extension as an exercise:

Let be any continuous function with . With and as above show that there exists a measurable set such that .