Wold’s decomposition theorem

Updated: Aug 20, 2021

A result stating that every zero-mean covariance stationary stochastic process It can be decomposed into a deterministic part and a non-deterministic part; the deterministic part is the optimal linear predictor of based on its lagged values and is uncorrelated with the non-deterministic part, which, in its turn, can be represented as an infiniteorder moving-average process.

Reference: Oxford Press Dictonary of Economics, 5th edt.

Sources & references
Risk disclaimer
James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the... read more.