Question

Intepret the time series component below with suitable sketch:
1. Seasonal component
2.cyclical component
3.irregular component
4.cyclical vs seasonal
5. trend vs seasonal
6. Cyclical vs trend
7. Trend component

Answer 1

Time series consists of various components.

1) Seasonal component is one which repeats itself over a specific short term period such as day, month, season etc.

2) Cyclic components are long term oscillations occurring in a time series. These oscillations are mostly observed in economics data and the periods of such oscillations are generally extended from five to twelve years or more. These oscillations are associated with the well known business cycles.

3) Irregular fluctuations are sudden changes occurring in a time series which are unlikely to be repeated. They are components of a time series which cannot be explained by trends, seasonal or cyclic movements. These variations are sometimes called residual or random components. These variations, though accidental in nature, can cause a continual change in the trends, seasonal and cyclical oscillations during the forthcoming period. Floods, fires, earthquakes, revolutions, epidemics, strikes etc., are the root causes of such irregularities.

4) Cyclic vs Seasonal

A seasonal pattern exists when a series is influenced by seasonal factors (e.g., the quarter of the year, the month, or day of the week). Seasonality is always of a fixed and known period. Hence, seasonal time series are sometimes called periodic time series whereas A cyclic pattern exists when data exhibit rises and falls that are not of fixed period. The duration of these fluctuations is usually of at least 2 years. Think of business cycles which usually last several years, but where the length of the current cycle is unknown beforehand.

5) Trend vs Seasonal

The following graphs clearly explain the seasonal and trend components:

6) Cyclic vs trend

The following graphs clearly explain difference between trend and cyclic component:

7) Trend variations are those that move up or down slowly in a predictable pattern

The following graphs explain each component well: