## Abstract

Given an observation of a discrete-time process {Y_{i}, i = 0 . . . n} assumed to be Markov, stationary, and time reversible, we develop a (conservative) test procedure of embeddability by a continuous-time reversible Markov process. The test statistic is derived from a set of moment inequality restrictions implied by the spectral properties of such continuous-time processes. Most interesting is that the embeddability condition of interest is a direct extension of the well-known embeddability problem by a two-state Markov chain. Empirical experiments show that the embeddability hypothesis is rejected more frequently for exchange rate daily data than for stock indices data.

Original language | English (US) |
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Pages (from-to) | 744-769 |

Number of pages | 26 |

Journal | Econometric Theory |

Volume | 14 |

Issue number | 6 |

DOIs | |

State | Published - 1998 |

## ASJC Scopus subject areas

- Social Sciences (miscellaneous)
- Economics and Econometrics