Definition:Independent Shocks

Definition
Let $M$ be a stochastic model which describes a time series in which adjacent observations are highly dependent.

Then $M$ may be able to be modelled by a time series whose elements are of the form:
 * $\map z t = \map {z_d} t + \map {z_r} t$

where:
 * $\map {z_d} t$ has a deterministic model
 * $\map {z_r} t$ has a stochastic model which consists of a sequence of independent random variables from a specified probability distribution (usually a white noise process).

The terms of the sequence $\sequence {z_r}$ are known as independent shocks.