Business Forecasting Study Set 1

Business

Quiz 4 :
Time Series and Their Components

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Quiz 4 :
Time Series and Their Components

In general, the time series data is having a lot of separation between them. Therefore, the decomposition method of time series would help to divide the separations of the variability. In addition, it is also used to develop the appropriate forecasting model to the time series data. Thus, these are the concepts that are explained by the decomposing a time series.

The additive component model is defined as the time series values, which are expressed by adding the components. Similarly, the multiplicative model is defined as the times series values that are expressed by product of the components. In some of the cases, the variability level of the time series increases. That is, the time series values are spread as increasing trend. Therefore, the multiplicative decomposition model is more useful to these data. Thus, the multiplicative decomposition model is more appropriate than an additive decomposition model.

Trend component indicates the overall long term upward or downward pattern of tendency in the time series. Therefore, the trend series is affected by the few basic forces. Some of the basic forces, which are affected by the trend-cycle, are listed below: • Rise in Prices • Enlargement in Population • Modified Technologies • Increases in Production level.