Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-26T06:43:19.037Z Has data issue: false hasContentIssue false
  • English
  • Français

TESTING FOR EMBEDDABILITY BY STATIONARY REVERSIBLE CONTINUOUS-TIME MARKOV PROCESSES

Published online by Cambridge University Press:  01 December 1998

Jean-Pierre Florens ,
Eric Renault  and
Nizar Touzi
Jean-Pierre Florens
Affiliation:
Université des Sciences Sociales de Toulouse
Eric Renault
Affiliation:
CREST-INSEE
Nizar Touzi
Affiliation:
Université Paris IX Dauphine
Get access Rights & Permissions [Opens in a new window]

Abstract

Given an observation of a discrete-time process {Yi,i = 0...n} assumed to be Markov, stationary, and time reversible, we develop a (conservative) test procedure of embeddability by a continuous-time reversible Markov process. The test statistic is derived from a set of moment inequality restrictions implied by the spectral properties of such continuous-time processes. Most interesting is that the embeddability condition of interest is a direct extension of the well-known embeddability problem by a two-state Markov chain. Empirical experiments show that the embeddability hypothesis is rejected more frequently for exchange rate daily data than for stock indices data.

Type
Research Article
Information
Econometric Theory , Volume 14 , Issue 6 , December 1998 , pp. 744 - 769
Copyright
© 1998 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)