Markov chain models, time series analysis and extreme value theory

D. S. Poskitt, Shin Ho Chung

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)

Abstract

Markov chain processes are becoming increasingly popular as a means of modelling various phenomena in different disciplines. For example, a new approach to the investigation of the electrical activity of molecular structures known as ion channels is to analyse raw digitized current recordings using Markov chain models. An outstanding question which arises with the application of such models is how to determine the number of states required for the Markov chain to characterize the observed process. In this paper we derive a realization theorem showing that observations on a finite state Markov chain embedded in continuous noise can be synthesized as values obtained from an autoregressive moving-average data generating mechanism. We then use this realization result to motivate the construction of a procedure for identifying the state dimension of the hidden Markov chain. The identification technique is based on a new approach to the estimation of the order of an autoregressive moving-average process. Conditions for the method to produce strongly consistent estimates of the state dimension are given. The asymptotic distribution of the statistic underlying the identification process is also presented and shown to yield critical values commensurate with the requirements for strong consistency.

Original languageEnglish
Pages (from-to)405-425
Number of pages21
JournalAdvances in Applied Probability
Volume28
Issue number2
DOIs
Publication statusPublished - 1 Jan 1996
Externally publishedYes

Keywords

  • Autoregressive moving-average
  • Consistency
  • Extreme value
  • Identification
  • Markov chain
  • Realization

Cite this