Framework
Components of a time series
The question it answers
An operations manager sees this quarter's sales jump and must decide on stock: how much is trend, how much is season, how much is the economic cycle?
- Origin
- Hyndman & Athanasopoulos, 2021
- Diagram type
- Hub diagram
- Level of analysis
- Individual
- Topics
- Data & analytics
Diagram
Components of a time series
Time series
Trend: long-term rise or fall
Seasonal: fixed, calendar-linked period
Cyclic: rises and falls of no fixed length, usually over two years
Remainder: what is left after the three layers above
Pitfalls
Pitfall
- Cycles are easily confused with seasons. A season has a fixed frequency tied to the calendar; a cycle rises and falls irregularly, usually over a longer span and driven by economic conditions.
- A short series can turn one stretch of a long cycle into a trend. The book's example is 100 trading days of 1981 US treasury bill contracts: a clear downward trend that, in a much longer series, might be part of a long cycle.
- When a series is decomposed, trend and cycle are usually merged into one trend-cycle component. The four layers here are a way of reading a series, not four separately estimated components.
Sources
References
Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.
- Hyndman, R.J. and Athanasopoulos, G. (2021) Forecasting: principles and practice (3rd edn). Melbourne: OTexts.No DOIotexts.comCited in 2 articles