Wold’s decomposition theorem

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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.


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