Which of the following statements is TRUE?
A) Residual variation cannot be determined for time series data
B) Residual variation may only be calculated for time series data when more than 10 data points exist
C) Residual variation is usually insignificant and so calculating it has little value in practice
D) Residual variation can be calculated when trend values and seasonal variation are known

Question

Quizplus · Accepted Answer

Residual variation refers to the portion of the total variation in a dataset that is not explained by the trend and seasonal components in time series analysis. Once the trend and seasonal variations are accounted for, the remaining variation (residuals) can be calculated, providing insights into the unexplained variance in the data. This process is not limited by the number of data points nor is it deemed insignificant, as understanding residuals can help in improving models and forecasting accuracy.

Which of the Following Statements Is TRUE