What are the four components of time series?

Answer 1

COMPONENTS OF TIME SERIES

The four components of time series are:

1.Secular trend

2.Seasonal variation

3.Cyclical variation

4.Irregular variation

Secular trend:A time series data may show upward trend or downward trend for a period

of years and this may be due to factors like increase in population,change in

technological progress ,large scale shift in consumers demands,etc.For

example,population increases over a period of time,price increases over a period of

years,production of goods on the capital market of the country increases over a period of

years.These are the examples of upward trend.The sales of a commodity may decrease

over a period of time because of better products coming to the market.This is an example

of declining trend or downward trend.The increase or decrease in the movements of a

time series is called Secular trend.

Seasonal variation: Seasonal variation are short-term fluctuation in a time series which

occur periodically in a year.This continues to repeat year after year.The major factors

that are responsible for the repetitive pattern of seasonal variations are weather

conditions and customs of people.More woollen clothes are sold in winter than in the

season of summer .Regardless of the trend we can observe that in each year more ice

creams are sold in summer and very little in Winter season.The sales in the departmental

stores are more during festive seasons that in the normal days.

Cyclical variations:Cyclical variations are recurrent upward or downward movements in a

time series but the period of cycle is greater than a year.Also these variations are not

regular as seasonal variation.There are different types of cycles of varying in length and

size.The ups and downs in business activities are the effects of cyclical variation.A

business cycle showing these oscillatory movements has to pass through four phasesprosperity,recession,depression and recovery.In a business,these four phases are

completed by passing one to another in this order.Irregular variation: Irregular variations are fluctuations in time series that are short in

duration,erratic in nature and follow no regularity in the occurrence pattern.These

variations are also referred to as residual variations since by definition they represent

what is left out in a time series after trend ,cyclical and seasonal variations.Irregular

fluctuations results due to the occurrence of unforeseen events like

floods,earthquakes,wars,famines,etc.