Time Series

A Time Series is a series of numerical data, which have been recorded at different intervals of time. It is a record of changes in variables over a period of time. OR Information about the past is gathered and recorded at successive intervals of time. Such data is generally referred to as time series. Thus when we observe numerical data at different points of time, then that set of observations is known as time series. For ex: If we study or observe population, production, sales, imports, exports etc., at different points of time say 5 or 10 years, then the set of observation formed will constitute a time series.

Uses of Time Series Analysis

Time series analysis helps to understand the past behaviour & thereby it is helpful in predicting the future behaviour. Time series analysis helps in planning future operations. Time series analysis also helps in comparing the actual performance with the expected performance & the variations if any can be analyzed.

It also helps in comparing different time series & thereby important conclusions can be drawn there from.

Components of Time Series

The basic types of variations which are responsible for changes in the series over a period of time are known as components of Time Series. They are: Secular Trend Seasonal variation Cyclical variations & Irregular variation

(i)Secular Trend
Changes that have occurred as a result of general tendency of the data to increase or decrease is known as secular movements. The general tendency of the data to grow or decline over a long period of time is technically called Secular trend or simply trend. Say for example, death rate in our country is showing a declining trend & the sale of four wheelers in our country is showing an increasing trend.

(ii) Seasonal variations

Changes that have taken place within a year as a result of change in climate, weather conditions, festivals etc.are called seasonal variations. These are variations that repeat during a period of 12 months & they can be predicted accurately. The factors which cause seasonal variations are; Climate & Weather Conditions Changes in climate cause seasonal variations. For example, during winter there is more demand on wollen clothes, hot drinks etc., whereas in summer, cotton clothes & cold drinks are demanded more. Similarly changes in climate also cause seasonal variations. The best example is agriculture.

Customs, Traditions & Habits

Customs, traditions & habits also have an impact on the seasonal variation. For example during the festival season the demand for sweet is more. Similarly the withdrawals from the bank will be high in beginning of the month. Similarly, most of the students buy books in the first few months before the examination. So the sale of books also shows the seasonal variation.

(iii)Cyclical variations

Changes that have taken place as a result of booms & depressions. Such changes are classified under cyclical variations. In boom period, prices are high & profits are easily made, but in depression period, there is a decline in business activity.

(iv) Irregular Variations Changes that have taken place as a result of such forces that cannot be predicted like flood, earthquakes, and famines etc. Such changes are classified under the head irregular or erratic variations. These variations refer to such variations in business activity which do not repeat in a define pattern eg. Earthquakes, famines, floods, etc.

Methods of measuring Trend

1. Free hand or Graphic method 2. Semi-Average method 3. The moving Average method

4. The method of Least squares