Everything about Components of Time Series: Part-1

  • It enables us to study the past behaviour of the phenomenon under consideration, i.e., to determine the type and nature of the variation in the data
  • There are apparent forecasting purposes in sales and demand, but another useful area is in statistical process control for the chemical and process manufacturers
  • It enables us to predict or estimate the behaviour of the phenomenon in the future which is essential for business planning
Components of Time Series
Secular Trend

The trend also called a secular or long-term trend is the basic tendency of a series to grow or decline over some time. The concept of trend does not include short-range oscillations, but rather the steady movement over a long time.”

Seasonal Trend
  1. Resulting from natural forces: As the name hints, the various seasons or weather conditions and climate changes play an important role in seasonal changes. For example, the sales of the umbrella in the rainy season, the demand for electric coolers in summer, etc.
  2. Resulting from human-made conventions: These variations in a time series within 12 months are due to habits, fashions, customs and conventions of the society. For example, sales of jewellery and ornaments go up considerably during marriages.
Cyclical and Seasonal Variation
Irregular Variation
Components of Time Series

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