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Overview of Time Series

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Estimated time: 7 minutes
Maharashtra State Board: Class 12

Definition: Time Series

A time series is a sequence of observations made on a variable at regular time intervals over a specified period of time.

Maharashtra State Board: Class 12

Key points: Components of Time Series

No. Component Simple Definition
1 Secular Trend (T) The long-term general direction in which the data moves over time.
2 Seasonal Variation (S) Regular changes that repeat within a year.
3 Cyclical Variation (C) Long-term up and down movements occur over several years.
4 Irregular Variation (I) Sudden and unpredictable changes in data.

Phases of Business Cycle:

  • Prosperity

  • Recession

  • Depression

  • Recovery

Maharashtra State Board: Class 12

Formula: Additive Model

\[X_t=T_t+S_t+C_t+I_t\]​

Maharashtra State Board: Class 12

Formula: Multiplicative Model

\[X_t=T_t\times S_t\times C_t\times I_t\]

Maharashtra State Board: Class 12

Formula: Method of Moving Averages

First moving average:

\[\frac{X_1+X_2+\cdots+X_k}{k}\]

Second moving average:

\[\frac{X_2+X_3+\cdots+X_{k+1}}{k}\]

Maharashtra State Board: Class 12

Formula: Method of Least Squares

Linear Trend Equation:

 \[X_t=a+bt\]

Normal Equations:

\[\sum X_t=na+b\sum t\]

\[\sum tX_t=a\sum t+b\sum t^2\]

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