Strong Law Of Large Numbers For Bounded Observations
Consider the following forecasting game (the Bounded Forecasting Game):
Players: Reality, Forecaster, Sceptic
Protocol:⚠ $\quad$ ⚠ $\mathcal{K}_0:=1$.⚠ $\quad$ FOR ⚠ $n=1,2,...$:⚠ $\quad$ ⚠ $\quad$ Forecaster announces ⚠ $m_n\in[-1,1]$⚠ $\quad$ ⚠ $\quad$ Sceptic announces ⚠ $M_n\in\mathbb{R}$⚠ $\quad$ ⚠ $\quad$ Reality announces ⚠ $x_n\in[-1,1]$⚠ $\quad$ ⚠ $\quad$ ⚠ $\mathcal{K}_n:=\mathcal{K}_{n-1}+M_n(x_n-m_n)$
Winner: Sceptic wins if ⚠ $\mathcal{K}_n$ is never negative and either
⚠ $\lim_{n\to\infty}\frac{1}{n}\sum_{i=1}^n (x_i-m_i) = 0$ or ⚠ $\lim_{n\to\infty}\mathcal{K}_n=\infty$ holds.
Theorem Sceptic has a winning strategy.
This theorem easily implies the usual measure-theoretic strong law of large numbers for bounded independent random variables ⚠ $x_n$ with means ⚠ $m_n$ (more generally, for bounded random variables ⚠ $x_n$ with conditional means ⚠ $m_n$). Indeed, if Reality produces ⚠ $x_n$ stochastically from a distribution with the mean value (given the past) ⚠ $m_n$, ⚠ $\mathcal{K}_n$ will be a martingale, and one can apply Ville's inequality.
Bibliography
- Glenn Shafer and Vladimir Vovk. Probability and finance: It's only a game!. New York: Wiley, 2001. Section 3.2.