Time vs. Ensemble Averages for Nonstationary Time Series

Joseph L. McCauley

Papers from arXiv.org

Abstract: We analyze the question whether sliding window time averages applied to stationary increment processes converge to a limit in probability. The question centers on averages, correlations, and densities constructed via time averages of the increment x(t,T)=x(t+T)-x(t)and the assumption is that the increment is distributed independently of t. We show that the condition for applying Tchebyshev's Theorem to time averages of functions of stationary increments is strongly violated. We argue that, for both stationary and nonstationary increments, Tchebyshev's Theorem provides the basis for constructing emsemble averages and densities from a single, historic time series if, as in FX markets, the series shows a definite statistical periodicity on the average.

Date: 2008-04
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