TIME SERIES ANALYSIS

Presented by : Amit Gairola Vinay

INTRODUCTION
A time series is an arrangement of statistical data in accordance with the time of its occurrence .It gives the measurement of phenomenon over a period of time. Time may be in terms of years, months, days and so on. Analysis of time series is of particular importance to economist and businessmen in studying the sales ,profit, production , investments etc. Over a period of time which helps them in planning future operations . Although time series usually refers to economic data , it also applies to data arising in natural and social sciences. mathematically, a time series may be defined as y=f(t), where y=value of variable at time t. Thus , a time series gives relationship between two variables one is independent variable time and other ,dependent variable i.e. y.

IMPORTANCE OF TIME SERIES ANALYSIS

Time series analysis is of great significance in business decision making for the following reasons: It helps in the understanding of past behaviour: by observing data over a period of time , one can understand what changes have taken place in the past. Such analysis is extremely helpful in predicting the future behaviour. It helps in planning future operations: statistical techniques have been evolved which enable time series to be analysed in such a way that the influences which have determined the form of that series may be ascertained. The frequency of occurrence of a certain factor helps in the prediction of probable future variations.

It helps in evaluating current accomplishments: The actual performance can be compared with expected performance and the cause of variation analysed. For eg. If expected sales for 2003 were 20 lacs color T.V. sets and the actual sales were only 19 lacs ;one can investigate the cause for the shortfall in achievement . It facilitates comparison : Different time series are often compared and important conclusions are drawn.

COMPONENTS OR TRENDS OF TIME SERIES ANALYSIS

The fluctuations of a time series into four basic types of variations which accounts for the changes in the series over a period of time. These four types of patterns ,variations or components or elements of time series .these are as follows: i. Secular trend ii. Seasonal variations iii. Cyclical variations iv. Irregular variations

SALE OF COCA COLA DURING THE YEARS 1989 TO 2003

The original data in the graph is represented by a curve .the general movement persisting over a long period of time represented by the diagonal line drawn through the irregular curve is called secular trend . The curve line shows the whole sequence of change within the span of year ,such type is seasonal variation.

Furthermore , looking at the broken curve superimposed on the original irregular curve ,we found pronounced fluctuations moving up and down every few years throughout the length of the chart. These are known as cyclical fluctuations. Finally, the little saw tooth irregularities on the original curve represents irregular movements. 1.Secular trend : the trend us general long-term movement in the time series value of the variable over a fairly long period of time. The trend of the series is generally either upward downward in nature. For instances ,the data relating to population , production, literacy etc. have upward trend and the factors like illiteracy, deaths etc. have a downward trend.

Factors affecting trend:

1.Population 2.Technological,intitutional and cultural changes

2.Seasonal variation: which occur these are those periodic

movements in business activity which occur regularly every year and have their origin in the nature itself.

Factors causing seasonal variations : A.Climatic and weather conditions:

Seasonal variations act on different products and industry differently.eg clothings during summers and winters.

B. Customs, traditions & habits :

These three play a crucial role in time series variations. For eg. Hike in demand of sweets and bank withdrawals at the time of festivals.

3.Cyclical variations: the cyclical variation refers to the

movement which occurs after time interval of more than one year. The figure below explains the business cycle.

4. Irregular variation : Variation as a result of unexpected,

unusual or accidental events are termed as irregular variation. Irregular variations is really intended to include all types of variations other than those accounting for the trend ,seasonal and cyclical movements. Highly random and unpredictable. Examples or causals of irregular variations are floods, earthquakes, strikes and wars.

THE ANALYSIS OF TIME SERIES

MATHEMATICAL MODEL FOR TIME SERIES

Additive model:
This is known as Additive Model- if changes are by constant absolute amounts. Y = T +S + C+ I Where: Y = Time series value T = Trends C = cyclical variations I = Irregular variations S= Seasonal variation
This model assumes that all the four components of time series operate independently of each other so that none of these components has any effect on the remaining three.

MULTIPLICATIVE MODEL
Multiplicative modelMultiplicative model is good if the changes are by a constant rate except the trend component. Y=T*S*C*I Where: the above symbols have their usual meanings.

This model assumes that the four components of the time series are due to different causes but they are not necessarily independent and they can affect each other.