Page 186 - P1 Integrated Workbook STUDENT 2018
P. 186
Chapter 10
Time series analysis
4.1 What is it?
Time series analysis uses moving averages to create a trend line over time,
established from historical data, that, when adjusted for seasonal variations, can
then be used to make predictions for the future.
4.2 Components of a time series
The trend describes the long term general movement of the data.
Cyclical variations The economic cycle of booms and slumps. This
element can be ignored for numerical examples in the
exam.
Seasonal variations a regular variation around the trend over a fixed time
period, usually one year.
Residual variations irregular, random fluctuations in the data usually
caused by factors specific to the time series. We try to
remove this element in the averaging process.
182
