Monotone graphical multivariate Markov chains

Abstract

In this paper, we show that a deeper insight into the relations among marginal processes of a multivariate Markov chain can be gained by testing hypotheses of Granger non-causality, contemporaneous independence and monotone dependence coherent with a stochastic ordering. The tested hypotheses associated to a multi edge graph are proven to be equivalent to equality and inequality constraints on interactions of a multivariate logistic model parameterizing the transition probabilities. As the null hypothesis is specified by inequality constraints, the likelihood ratio statistic has chi-bar-square asymptotic distribution whose tail probabilities can be computed by simulation. The introduced hypotheses are tested on real categorical time series. © Springer-Verlag Berlin Heidelberg 2010.