Time series analysis Time series analysis Time series analysis is a specific way of analyzing a sequence of data points collected over an interval of time. In time series analysis, analysts record data points at consistent intervals over a
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Presentation Transcript
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Time series analysis<br>
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Time series analysis Time series analysis is a specific way of analyzing a sequence of data points collected over an interval of time. In time series analysis, analysts record data points at consistent intervals over a set period of time rather than just recording the data points intermittently or randomly.
Time series analysis typically requires a large number of data points to ensure consistency and reliability. An extensive data set ensures you have a representative sample size and that analysis can cut through noisy data. It also ensures that any trends or patterns discovered are not outliers and can account for seasonal variance. Additionally, time series data can be used for forecasting—predicting future data based on historical data.<br>
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Major components: Trend component
Seasonal component
Cyclical component
Irregular component<br>
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1. Trend component: This is useful in predicting future movements. Over a long period of time, the trend shows whether the data tends to increase or decrease. The term “trend” refers to an average, long-term, smooth tendency. Not all increases or decreases have to occur simultaneously. Different sections of time show varying tendencies in terms of trends that are increasing, decreasing, or stable. There must, however, be an overall upward, downward, or stable trend.<br>
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2. Seasonal component: The seasonal component of a time series is the variation in some variable due to some predetermined patterns in its behavior. This definition can be used for any type of time series including individual commodity price quotes, interest rates, exchange rates, stock prices, and so on.
In many applications, seasonal components can be represented by simple regression equations. This approach is sometimes referred to as a “seasonalized regression” or a “bimodal regression”<br>
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3. Cyclical component: The cyclical component in a time series is the part of the movement in the variable which can be explained by other cyclical movements in the economy.
In other words, this term gives information about seasonal patterns. It is also called the long-period (LP) effect or boom-bust process. For example, during recessions, business cycles are usually characterized by slower growth rates than before the recession started.<br>
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4. Irregular component: The irregular component is the part of the movement in the variable which cannot be explained by cyclical movements in the economy.
In other words, this term gives information about non-seasonal patterns.
This term refers to changes that are not cyclical. These include boom-bust processes, permanent changes in the long-term trend of a variable, or “not seasonally adjusted” information which is not normally found in national income and product accounts (such as depreciation, research and development expenditures, and agricultural subsidies).<br>
