Dependence and Related Concepts

This chapter introduces a number of concepts and models that have in common the central concern of characterising the dependence in a stochastic process. Intuitively we are interested in whether what happens at time t has been affected by what happened before that time, sometimes referred to the ‘memory’ of the process. In an economic context, the more usual situation is that stochastic processes have memory to some degree and our interest is in assessing the extent of that memory. This is important for the generalisation of the central limit theorem (CLT), see Chapter 4, Section 4.2.3, and the functional CLT, see Chapter 6, Section 6.6.1.