Question

Components of Time Series ,

Answer 1

1. Long-Term Component or Trend: It is the measure of effect which prevails on the time series for a long period of time. Trend may be either increasing or decreasing or stable in terms of time. It represents the mathematical form and direction of variation taking place in the variable quantity y_t of a given time series. It is denoted by the symbol Tt.

2. Seasonal Component: It represents the changes taking place in the variable quantity y_t of time series at fixed period of time in the year (e.g., winter, summer, monsoon). It is short term in nature and denoted by the symbol St.

3. Cyclical Component: The variations arising due to boom and recession or business cycles in the variable quantity y_t of time series are called the cyclical component. The duration of oscillation of cyclical variation varies from 10 to 20 years. It is denoted by the symbol C_t. Eliminating trend, seasonal component and random component from the variable quantity y_t of time series, we can obtain the cyclical fluctuation.
Thus, Ct = y_t – (T_t + S_t + R_t).

4. Random or Irregular Component: The fluctuations arising in the variable quantity y_t of time series due to political, natural or random causes are called random or irregular component. It is denoted by the symbol Rr The component obtained by eliminating trend, seasonal fluctuations and cyclical fluctuations from the variable quantity y_t of time series is a random or irregular component. Thus, R_t = y_t – (T_t + S_t + C_t). This type of fluctuations are subject to uncontrollable forces and cannot be predicted in advance.