Distance correlation for long-range dependent time series
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We apply the concept of distance correlation for testing independence of long-range dependent time series. For this, we establish a non-central limit theorem for stochastic processes with values in an L_2-Hilbert space. This limit theorem is of a general theoretical interest that goes beyond the context of this article. For the purpose of this article, it provides the basis for deriving the asymptotic distribution of the distance covariance of subordinated Gaussian processes. Depending on the dependence in the data, the standardization and the limit of distance correlation vary. In any case, the limit is not feasible, such that test decisions are based on a subsampling procedure. We prove the validity of the subsampling procedure and assess the finite sample performance of a hypothesis test based on the distance covariance. In particular, we compare its finite sample performance to that of a test based on Pearson's sample correlation coefficient. For this purpose, we additionally establish convergence results for this dependence measure. Different dependencies between the vectors are considered. It turns out that only linear correlation is better detected by Pearson's sample correlation coefficient, while all other dependencies are better detected by distance correlation. An analysis with regard to cross-dependencies between the mean monthly discharges of three different rivers provides an application of the theoretical results established in this article.
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