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What are the main components of time series analysis?
in Data Science & Statistics by Diamond (80,728 points) | 41 views

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The main components of time series are:


a) Secular fend
The general tendency of the time series to increase or decrease or stagnate during a long period of time is called secular trend or simply trend. This phenomenon is usually observed in most of the series that show growth. For example, an upward tendency is usually observed in time series relating to population, production and sales of products, prices, income, bank deposits, etc. while a downward tendency is notice d in the time series relating to death, epidemics etc. due to advancement in technology, improved medical facilities etc. Secular trend is regular, smooth and long term movement of a statistical series. It reveals the general tendency of the data.


b) Season variation
It represents a periodic movement where the period is no longer than one year. The factors which mainly cause this type of variation in time series are climatic changes of the different seasons and the customs and habits which people follow at different times. The short-range stock and brisk periods of business activity at different seasons of the year, production and consumption of commodities, sales and profits of a company, etc. are in fact attributed to seasonal variations.

The main objective of the measurement of seasonal variations is to isolate them from the attend and study their effects. A study of the seasonal patterns is extremely useful to- businessmen, producers, salemanagers etc. It helps in planning future operations and formulation of policy, in decisions regarding purchase or production, inventory control, personal requirements, selling and advertising.

 

c) Cyclical variations
Cyclical variations or fluctuations are another type of periodic movement, with a period more than one year. Such movements are fairly regular in nature. One complain period is called a cycle. Cyclical fluctuations are found to exist in most of the business and economic time series. The four phases of business cycle are usually $x$ uncompleted over a period of 8 to 10 years. These phases are: (i) prosperity, (ii) decline, (iii) depression and (iv) recovery.

 

d) Irregular variation
Irregular variations or 'movements are -such variations which are completely unpredictable in character. These are unforeseen variations usually caused by factors which are either wholly unaccountable on caused by such unforeseen events as war, flood strikes and lockouts etc. These may sometimes be the result of many small forces each of which has a negligible effect but their combined effect is not negligible. They are in most cases beyond human control.

by Diamond (80,728 points)

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