Conditional Expectation and Variance
Properties:
is the conditional expectation of
given
- is a fixed value, butis a random variable (it is a function of)
- Iterated expectation:
- Additivity:
- does not work on the right hand side:
- Linearity:
- Conditioning on the same variable:
If
is difficult to find directly, we can use the variance decomposition to condition the variance on another variable.
Last modified 2yr ago