The observed value of a time series may be influenced by different underlying patterns or movements. The important components commonly studied are Trend, Seasonal Variation, Cyclical Variation and Irregular Variation.
The observed value of a time series may be influenced by different underlying patterns or movements. The important components commonly studied are Trend, Seasonal Variation, Cyclical Variation and Irregular Variation.
Trend represents the long-term general direction of a time series. It may show a long-term increase, decrease, or relatively stable movement.
A company's sales increasing gradually over several years indicate an upward trend.
Seasonal variation refers to a pattern that repeats at a regular and known interval, such as monthly, quarterly, or weekly.
Retail sales may increase every year during the festival season.
Cyclical variation refers to long-term fluctuations around the trend that are generally associated with economic or business cycles.
Business activity may rise during an expansion phase and decline during an economic slowdown.
Irregular variation represents unpredictable movements caused by unusual or random events. These movements do not follow a regular pattern.
A sudden fall in sales due to an unexpected natural disaster.