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Projective Stochastic Equations and Nonlinear Long Memory

Published online by Cambridge University Press:  22 February 2016

Ieva Grublytė
Affiliation:
Vilnius University
Donatas Surgailis
Affiliation:
Vilnius University
Corresponding
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Abstract

A projective moving average {X t , t ∈ ℤ} is a Bernoulli shift written as a backward martingale transform of the innovation sequence. We introduce a new class of nonlinear stochastic equations for projective moving averages, termed projective equations, involving a (nonlinear) kernel Q and a linear combination of projections of X t on ‘intermediate’ lagged innovation subspaces with given coefficients α i and β i,j . The class of such equations includes usual moving average processes and the Volterra series of the LARCH model. Solvability of projective equations is obtained using a recursive equality for projections of the solution X t . We show that, under certain conditions on Q, α i , and β i,j , this solution exhibits covariance and distributional long memory, with fractional Brownian motion as the limit of the corresponding partial sums process.

Type
General Applied Probability
Copyright
© Applied Probability Trust 

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