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N Data Analysis: Bush, T. (2020, June 8) - Time Series Analysis: Definition, Benefits, Models. Retrieved From

Time series analysis involves identifying patterns in correlated data over time to understand how a metric changes and forecast future values. It analyzes aspects like autocorrelation, seasonality, and stationarity. Autocorrelation refers to how observations repeat themselves over regular intervals like seasons. Stationarity measures how much a time series' mean and variance remain consistent over time. Testing for stationarity is important for determining if a time series is stable and can be modeled effectively.

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109 views

N Data Analysis: Bush, T. (2020, June 8) - Time Series Analysis: Definition, Benefits, Models. Retrieved From

Time series analysis involves identifying patterns in correlated data over time to understand how a metric changes and forecast future values. It analyzes aspects like autocorrelation, seasonality, and stationarity. Autocorrelation refers to how observations repeat themselves over regular intervals like seasons. Stationarity measures how much a time series' mean and variance remain consistent over time. Testing for stationarity is important for determining if a time series is stable and can be modeled effectively.

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madhav
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© © All Rights Reserved
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Bush,T.(2020, June 8). Time Series Analysis: Definition, Benefits, Models.

Retrieved from
https://pestleanalysis.com/time-series-analysis/

Ostrom, C. W.(1990). Time series analysis: Regression techniques (2nd ed.). Thousand Oaks, CA: Sage
Publications.

In data analysis, a time series is a collection of data points or quantitative observations


that are equally spaced in time and measured successively. Examples of time series
include the continuous monitoring of a person’s heart rate, hourly readings of air
temperature, daily closing price of a company stock, monthly rainfall data, and yearly
sales figures. It’s a fundamental method for understanding how a metric changes over
time and forecasting future values. Analysts use time series methods in a wide variety of
contexts (Ostrom,1990).

The regression of time series is similar to other types of regression with two
important differences. Firstly, time variables themselves: trend over time, seasonality,
and business cycles, are often useful in describing and/or predicting the behavior of a
time series. Secondly, the order in which the data occurs in the spreadsheet is important
because, unlike cross-sectional data, the ordering is not arbitrary but rather represents
the order in which the data were collected.
Example of Time Series Data

Time series analysis is the process of analyzing a time series. It is chiefly concerned with identifying
three different aspects of the time series, which can be used to better clean, understand, and forecast the
data. It is the assessment of relationships between two or among more variables over periods of time.

Time series analysis is the analysis of past statistical data, recorded at successive time intervals, with a
view to projecting this experience of the past to predict what will happen in the (uncertain) future.
Thus, time-series information can be used for FORECASTING purposes.
Factors in Time Series Analysis
When analyzing a time series, this form of data analysis involves identifying at least three
insightful aspects of the data. These factors are autocorrelation, seasonality, and
stationarity(Bush,2020).

Autocorrelation
In a time series, autocorrelation is the tendency of data observations and patterns to repeat themselves.
If these observations and patterns repeat themselves at regular individuals, the result may also be
known as seasonality.

Seasonality
Seasonality is when observations and patterns repeat themselves at regular intervals. The best example
of seasonality would be a graph of temperatures across multiple years. During the summer,
temperatures are high; during the winter, temperatures are low.

Stationarity
Stationarity is a measure of how little a time series’ mean and variance changes over time. For example,
if the temperatures measured across a period of ten years are of similar magnitude and variance — after
accounting for the seasonality of the dataset — then the time series would be said to have high
stationarity.

goals of time series analysis:


1. Descriptive: Identify patterns in correlated data trends and seasonal variation
2. Explanation: understanding and modeling the data
3. Forecasting: prediction of short-term trends from previous patterns
4. Intervention analysis: how does a single event change the time series?
5. Quality control: deviations of a specified size indicate a problem

Stationarity
a time series is stationary if its behaviour does not change over time. This means, for
example, that the values always tend to vary about the same level and that their
variability is constant over time. A stationary time series is one whose
statistical properties such as mean, variance, autocorrelation, etc. are
all constant over time. Time series are stationary if they do not have trend or seasonal
effects. Not all time series that we encouter are stationary.

Indeed, non-stationary series tend to be the rule rather than the exception. However,
manytime series are related in simple ways to series which are stationary. Two im-
portant examples of this are:
importance

When a time series is stationary, it can be easier to model. Statistical modeling methods
assume or require the time series to be stationary to be effective.

Why is it important to test for stationarity?


We usually consider a nonstationary series for the following reasons:
1.  To evaluate the behaviour of series over time. Is the series trending upward or downward? This can
be verified from performing a stationarity test. In other words, the test can be used to evaluate the
stability or predictability of time series. If a series is nonstationary, that means the series is unstable
or unpredictable and therefore may not be valid for inferences, prediction or forecasting.

2. To know how a series responds to shocks requires carrying out a stationarity test. If such series is
nonstationary, the impact of shocks to the series are more likely to be permanent. Consequently, if a
series is stationary, impact of shocks will be temporary or brief.

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