Decomposition Based On Rates of Change
This is an important technique for all types of time series analysis, especially for seasonal adjustment. It seeks to construct, from an observed time series, a number of component series (that could be used to reconstruct the original by additions or multiplications) where each of these has a certain characteristic or type of behaviour. For example, monthly or quarterly economic time series are usually decomposed into:
- the Trend Component that reflects the long term progression of the series (secular variation)
- the Cyclical Component that describes repeated but non-periodic fluctuations, possibly caused by the economic cycle
- the Seasonal Component reflecting seasonality (seasonal variation)
- the Irregular Component (or "noise") that describes random, irregular influences. It represents the residuals of the time series after the other components have been removed.
An example of statistical software for this type of decomposition is the program BV4.1 that is based on the so-called Berlin procedure.
Kendall shows an example of a decomposition into smooth, seasonal and irregular factors for a set of data containing values of the monthly aircraft miles flown by UK airlines.
Read more about this topic: Decomposition Of Time Series
Famous quotes containing the words based, rates and/or change:
“Both magic and religion are based strictly on mythological tradition, and they also both exist in the atmosphere of the miraculous, in a constant revelation of their wonder-working power. They both are surrounded by taboos and observances which mark off their acts from those of the profane world.”
—Bronislaw Malinowski (1884–1942)
“[The] elderly and timid single gentleman in Paris ... never drove down the Champs Elysees without expecting an accident, and commonly witnessing one; or found himself in the neighborhood of an official without calculating the chances of a bomb. So long as the rates of progress held good, these bombs would double in force and number every ten years.”
—Henry Brooks Adams (1838–1918)
“If we are to change our world view, images have to change. The artist now has a very important job to do. He’s not a little peripheral figure entertaining rich people, he’s really needed.”
—David Hockney (b. 1937)