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Components of a Time Series

Four components of a time series are secular trend, cyclical variation, seasonal variation, and irregular variation (Lind, 2005). Briefly describe each of these components and provide a real-world example of one component.

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A time series indicates any group of statistical information accumulated over time period about the changes in an economic variable. There are four components of changes involved in time series analysis. All time series contain at least one of the four time series components. The very basic objective is breaking down the data over time into one or more of these components.

1. Secular trend.
2. Cyclic variation
3. Seasonal variation
4. Irregular variation

Term trend implies Secular trend. It measures long-term changes occurring in a time series without bothering about short-term fluctuations occurring in between. In short, secular trend measures smooth and regular long-term movements of a time series delineating the increasing, decreasing or stagnant trend over a long span of time. This is true for most of the series of business and Economic Statistics.

For example, an upward tendency would be seen in data pertaining to population, agriculture ...

Solution Summary

The components of a time series are discussed. The solution briefly describes each of the components and provides a real-world example of each component.