Information-Theoretic Analysis of Serial Dependence and Cointegration.

Abstract

This paper is devoted to presenting wider characterizations of memory and cointegration in time series, in terms of information-theoretic statistics such as the entropy and the mutual information between pairs of variables. We suggest a nonparametric and nonlinear methodology for data analysis and for testing the hypotheses of long memory and the existence of a cointegrating relationship in a nonlinear context. This new framework represents a natural extension of the linear-memory concepts based on correlations. Finally, we show that our testing devices seem promising for exploratory analysis with nonlinearly cointegrated time series.