A Martingale Decomposition of Discrete Markov Chains

We consider a multivariate time series whose increments are given from a homogeneous Markov chain. We show that the martingale component of this process can be extracted by a filtering method and establish the corresponding martingale decomposition in closed-form. This representation is useful for the analysis of time series that are confined to a grid, such as financial high frequency data.

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Year of publication:	2015-04-01
Authors:	Hansen, Peter Reinhard
Institutions:	School of Economics and Management, University of Aarhus
Subject:	Markov Chain \| Martingale \| Beveridge-Nelson Decomposition

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Extent:	application/pdf
Series:	CREATES Research Papers.
Type of publication:	Book / Working Paper
Notes:	1 pages long
Classification:	C10 - Econometric and Statistical Methods: General. General ; C22 - Time-Series Models ; c58
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011268025