Wold's decomposition theorem

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

Subjects: Economics.

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