Strong Orthogonal Decompositions and Non-Linear Impulse Response Functions for Infinite Variance Processes

Jonathan B. Hill
Additional contact information
Jonathan B. Hill: Florida International University

Econometrics from University Library of Munich, Germany

Abstract: In this paper we prove Wold-type decompositions with strong-orthogonal prediction innovations exist in smooth, reflexive Banach spaces of discrete time processes if and only if the projection operator generating the innovations satisfies the property of iterations. Our theory includes as special cases all previous Wold-type decompositions of discrete time processes; completely characterizes when nonlinear heavy-tailed processes obtain a strong-orthogonal moving average representation; and easily promotes a theory of nonlinear impulse response functions for infinite variance processes. We exemplify our theory by developing a nonlinear impulse response function for smooth transition threshold processes, we discuss how to test decomposition innovations for strong orthogonality and whether the proposed model represents the best predictor, and we apply the methodology to currency exchange rates.

JEL-codes: C22 C29 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-01-06, Revised 2005-12-16
Note: Type of Document - pdf; prepared on WinXP; pages: 36
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/em/papers/0401/0401001.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0401001

Access Statistics for this paper

More papers in Econometrics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).