Explain the statement that a time series can be viewed as being made up of a number of components. Provide examples of business and economic time series for which you would expect particular components to be important.
Explain the statement that a time series can be viewed as being made up of a number of components. Provide examples of business and economic time series for which you would expect particular components to be important.
Time series analysis is the arrangement of data according to the event of their occurrence. It is useful for various business and economic analysis.
Time series is being made up of number of components which are:
1) TREND - Trend shows a general change in the data during a long period of time. The overall trend must be increasing, decreasing or stable. For example: number of industries, agricultural production etc.
2) SEASONAL VARIATIONS - These variations occur in a regular or periodic manner. They depict some kind of similar pattern over the period of 12 months.
3) CYCLIC VARIATIONS - These variations span for a period of more than 1 year and are also called the business cycle.
4) IRREGULAR OR RANDOM VARIATIONS - These fluctuations are unpredictable and sudden which cannot be controlled.
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