BUSINESS RESEARCH METHODS

UNIT I AND II

SUBJECT TEACHER – Ms. Farha subhani

Meaning Of Research:

Research in simple terms refers to search for knowledge. It is a scientific and systematic search
for information on a particular topic or issue. It is also known as the art of scientific
investigation.

According to Redman and Mory (1923), research is a “systematized effort to gain new
knowledge”. It is an academic activity and therefore the term should be used in a technical sense.
According to Clifford Woody (kothari, 1988), research comprises “defining and redefining
problems, formulating hypotheses or suggested solutions; collecting, organizing 4
and evaluating data; making deductions and reaching conclusions; and finally, carefully testing
the conclusions to determine whether they fit the formulated hypotheses

Objectives Of Research:
The objective of research is to find answers to the questions by applying scientific procedures. In
other words, the main aim of research is to find out the truth which is hidden and has not yet
been discovered. Although every research study has its own specific objectives, the research
objectives may be broadly grouped as follows:
1. To gain familiarity with new insights into a phenomenon (i.e., formulative research studies);
2. To accurately portray the characteristics of a particular individual, group, or a situation (i.e.,
descriptive research studies);
3. To analyze the frequency with which something occurs (i.e., diagnostic research studies);
and
4. To examine the hypothesis of a causal relationship between two variables (i.e., hypothesis-
testing research studies).

Need and role of business research

i. The knowledge of research methodology provides training to new researchers and enables
them to do research properly. It helps them to develop disciplined thinking or a ‘bent of
mind’ to objectively observe the field;
ii. The knowledge of doing research inculcates the ability to evaluate and utilize the research
findings with confidence;
iii. The knowledge of research methodology equips the researcher with the tools that help
him/her to make the observations objectively; and
iv. The knowledge of methodology helps the research consumers to evaluate research and make
rational decisions.

Features / characteristics of Research

1. Empirical - based on observations and experimentation on theories.

2. Systematic - follows orderly and sequential procedure.
3. Controlled - all variables except those that are tested/experimented upon are kept
constant.
4. Employs hypothesis - guides the investigation process
5. Analytical - There is critical analysis of all data used so that there is no error in their
interpretation
6. Objective, Unbiased, & Logical - all findings are logically based on empirical
7. Employs quantitative or statistical methods - data are transformed into numerical
measures and are treated statistically.

Research Process:
Research process consists of a series of steps or actions required for effectively conducting
research. The following are the steps that provide useful procedural guidelines regarding the
conduct of research:
(1) Formulating the research problem;
(2) Extensive literature survey;
(3) Developing hypothesis;
(4) Preparing the research design;
(5) Determining sample design;
(6) Collecting data;
(7) Execution of the project;
(8) Analysis of data;
(9) Hypothesis testing;
(10) Generalization and interpretation, and
(11) Preparation of the report or presentation of the results.

1. In other words, it involves the formal write-up of conclusions.

1. Research Problem:
The first and foremost stage in the research process is to select and properly define the research
problem. A researcher should first identify a problem and formulate it, so as to make it amenable
 or susceptible to research. In general, a research problem refers to an unanswered question that a
researcher might encounter in the context of either a theoretical or practical situation, which
he/she would like to answer or find a solution to.

identification of a research problem is the pre-condition to conducting research. A research

problem is said to be the one which requires a researcher to find the best available solution to the
given problem. That is, the researcher needs to find out the best course of action through which
the research objective may be achieved optimally in the context of a given situation.

Research design definition

Research design is the framework of research methods and techniques chosen by a researcher.
The design allows researchers to hone in on research methods that are suitable for the subject
matter and set up their studies up for success.

The design of a research topic explains the type of research (experimental, survey, correlational,

semi-experimental, review) and also its sub-type (experimental design, research problem,
descriptive case-study). 

There are three main types of research design: Data collection, measurement, and analysis.

The type of research problem an organization is facing will determine the research design and
not vice-versa. The design phase of a study determines which tools to use and how they are used.

An impactful research design usually creates a minimum bias in data and increases trust in the
accuracy of collected data. A design that produces the least margin of error in experimental
research is generally considered the desired outcome. The essential elements of the research
design are:

1. Accurate purpose statement

2. Techniques to be implemented for collecting and analyzing research
3. The method applied for analyzing collected details
4. Type of research methodology
5. Probable objections for research
6. Settings for the research study
7. Timeline
8. Measurement of analysis
Proper research design sets your study up for success. Successful research studies provide
insights that are accurate and unbiased. You’ll need to create a survey that meets all of the main
characteristics of a design. There are four key characteristics of research design:
Neutrality: When you set up your study, you may have to make assumptions about the data you
expect to collect. The results projected in the research design should be free from bias and
neutral. Understand opinions about the final evaluated scores and conclusion from multiple
individuals and consider those who agree with the derived results.

Reliability: With regularly conducted research, the researcher involved expects similar results
every time. Your design should indicate how to form research questions to ensure the standard of
results. You’ll only be able to reach the expected results if your design is reliable.

Validity: There are multiple measuring tools available. However, the only correct measuring
tools are those which help a researcher in gauging results according to the objective of the
research. The questionnaire developed from this design will then be valid.

Generalization: The outcome of your design should apply to a population and not just a
restricted sample. A generalized design implies that your survey can be conducted on any part of
a population with similar accuracy.

The above factors affect the way respondents answer the research questions and so all the above
characteristics should be balanced in a good design.

A researcher must have a clear understanding of the various types of research design to select
which model to implement for a study. Like research itself, the design of your study can be
broadly classified into quantitative and qualitative.

Qualitative research design: Qualitative research determines relationships between collected

data and observations based on mathematical calculations. Theories related to a naturally
existing phenomenon can be proved or disproved using statistical methods. Researchers rely on
qualitative research design methods that conclude “why” a particular theory exists along with
“what” respondents have to say about it.

Quantitative research design: Quantitative research is for cases where statistical conclusions to

collect actionable insights are essential. Numbers provide a better perspective to make critical
business decisions. Quantitative research design methods are necessary for the growth of any
organization. Insights drawn from hard numerical data and analysis prove to be highly effective
when making decisions related to the future of the business.

You can further break down the types of research design into five categories:

1. Descriptive research design: In a descriptive design, a researcher is solely interested in

describing the situation or case under their research study. It is a theory-based design method
which is created by gathering, analyzing, and presenting collected data. This allows a researcher
to provide insights into the why and how of research. Descriptive design helps others better
understand the need for the research. If the problem statement is not clear, you can conduct
exploratory research. 
2. Experimental research design: Experimental research design establishes a relationship
between the cause and effect of a situation. It is a causal design where one observes the impact
caused by the independent variable on the dependent variable. For example, one monitors the
influence of an independent variable such as a price on a dependent variable such as customer
satisfaction or brand loyalty. It is a highly practical research design method as it contributes to
solving a problem at hand. The independent variables are manipulated to monitor the change it
has on the dependent variable. It is often used in social sciences to observe human behavior by
analyzing two groups. Researchers can have participants change their actions and study how the
people around them react to gain a better understanding of social psychology.

3. Correlational research design: Correlational research is a non-experimental research design

technique that helps researchers establish a relationship between two closely connected variables.
This type of research requires two different groups. There is no assumption while evaluating a
relationship between two different variables, and statistical analysis techniques calculate the
relationship between them.

A correlation coefficient determines the correlation between two variables, whose value ranges
between -1 and +1. If the correlation coefficient is towards +1, it indicates a positive relationship
between the variables and -1 means a negative relationship between the two variables. 

4. Diagnostic research design: In diagnostic design, the researcher is looking to evaluate the
underlying cause of a specific topic or phenomenon. This method helps one learn more about the
factors that create troublesome situations. 

This design has three parts of the research:

· Inception of the issue

· Diagnosis of the issue

· Solution for the issue

5. Explanatory research design: Explanatory design uses a researcher’s ideas and thoughts on a

subject to further explore their theories. The research explains unexplored aspects of a subject
and details about what, how, and why of research questions.

Descriptive research design

Descriptive research design is mainly used to describe a behavior or type of subject. It not
intended to look for specific relationships between variables neither does it correlate variables.
Its major set back is that it cannot identify cause because its setting is completely natural.
Moreover, it has all the variables present. Descriptive research design is an asset to a researcher
because a lot of information can be acquired through description. For purposes of identification
of variables and hypothetical constructs which can be subjected to further investigations using
other means, descriptive research design come in handy. Some of its advantages include the
ability of its descriptions to be used to indirectly test theory or model behaviors that cannot be
studied using any other means (Creswell 1998).

Categories of descriptive design include surveys and observational studies. Field surveys feature
prominently under surveys. Under this, the participants are expected to fill in the questionnaires
or be subjected to interviews in natural settings.

Much attention should be devoted to construction and content validity of the questionnaires; the
scores must be reliable; the questions should be clear and precise hence mutually exclusive
answers; the interviewer must be consistent and controlled in his or her behavior; and the order
of questions as they appear in the questionnaire have to be counterbalanced. This helps in
identifying and controlling one sided responses. Finally, field surveyors have to pay attention to
concrete behaviors that naïve respondents describe accurately.

Surveys are quite often mailed or facilitated through phone calls. Surveys conducted through
mails involve questionnaires that are relatively long. It takes some time before these mails are
returned. However, not all of them can be returned but 50% return rate is normally okay for the
survey.

Exploratory research design

Exploratory research design is normally used in research whose purpose involves inquiry into
new products that should be developed, how the product appeal will enhance its advertising, and
how the existing services can be improved.

Research questions in exploratory research design border on the alternative ways that exist that
can be used for example to provide lunch for school children, the kind of benefits people stand to
get from the product, and the nature of dissatisfaction the customer may be getting from the
product in the case of marketing research. The hypothesis here has unknown constructs. The
hypothesis also suspects that the major problem in the study could be impersonalization.

Causal research design

The purpose of this research design in marketing research perspective is to ascertain whether an
increase in the service staff ca be profitable, which advertising program for public transit is
suitable, and whether new budget should be contemplated. The research questions here touch on
the correlation between size of staff offering services and the revenue that is accrued. What do
people stand to get from cars and the public transport.

Comparison of the three research designs

The major objective of exploratory research design is to discover ideas and insights where as in
descriptive research design involves describing market aspects and functions. Nevertheless,
causal research design tries to determine the cause-effect relationships in the research one is
conducting.

A major feature of exploratory design is its flexibility, its adaptability, and the front end of total
research design. However, descriptive research design is marked by past formulation of specific
hypotheses from observations and studies. This design is pre-planned and structured. Causal
research approach can proceed through one or more independent variables. Other mediating
variables that fall under this design can also be controlled.

An exploratory research approach entails the use of surveys, case studies, information from other
studies, and qualitative analyses. In contrast, a descriptive research approach uses information
from other studies, panels, analyses, and observation. Causal research design strictly uses
experiments.

What are the steps in research design process?

Following are the steps in research design:

1. The Problem – The first step involves the proper selection and then carefully defining the
problem. By this researcher will be enabled to know about what he has to search, but it should be
kept in mind that the problems selected should not be unmanageable in nature and also should
not be based on the desires.
2. Objective of the study – The objective should be very clear in the mind of the researcher as
this will lead to the clarity of the design and proper response from the respondents.
3. Nature of the study – The research design should be very much in relation with the nature of
the study, which is to be carried out.
4. Data sources – The various sources of the data or the information should be very clearly
stated by the researcher.
5. Techniques of data collection – For the collection of the required information, it sometimes
becomes very necessary to use some especial techniques.
6. Social cultural context – Research design based on the social cultural concept is prepared in
order to avoid the various study variations.
7. Geographical limit – This step becomes a necessity at this point of time as with the help of
this step, research linked to the hypothesis applies only to certain number of social groups.
8. Basis of selection – Selecting a proper sample acts as a very important and critical step and
this is done with the help of some mechanics like drawing a random stratified, deliberate, double
cluster or quota sample etc.

What Is a Time Series?

A time series is a sequence of numerical data points in successive order. In investing, a time
series tracks the movement of the chosen data points, such as a security’s price, over a specified
period of time with data points recorded at regular intervals. There is no minimum or maximum
amount of time that must be included, allowing the data to be gathered in a way that provides the
information being sought by the investor or analyst examining the activity.

A time series is a series of data points indexed (or listed or graphed) in time order. Most
commonly, a time series is a sequence taken at successive equally spaced points in time. ...Time
series forecasting is the use of a model to predict future values based on previously observed
values.

Objectives

1. Compact description of data.

2. Interpretation.

3. Forecasting.

4. Control.

5. Hypothesis testing.

6. Simulation.

Trend analysis is the widespread practice of collecting information and attempting to spot a pattern. In
some fields of study, the term "trend analysis" has more formally defined meanings.

Trend analysis is a mathematical technique that uses historical results to predict future outcome.
A trend is a recurring pattern and trend analysis is the practice of collecting data in an attempt to spot
that pattern. When the user needs and behavior are changing rapidly, trend analysis is a method that
can act as a window into the future demands of users. Knowing now how the needs, behavior and
expectations of users will evolve, can help companies act fast and invest in research and development of
products and services that can cater to those needs and expectations.

In statistics, trend analysis often refers to techniques for extracting an underlying pattern of behavior in
a time series which would otherwise be partly or nearly completely hidden by noise. If the trend can be
assumed to be linear, trend analysis can be undertaken within a formal regression analysis, as described
in Trend estimation. If the trends have other shapes than linear, trend testing can be done by non-
parametric methods, e.g. Mann-Kendall test, which is a version of Kendall rank correlation coefficient.

Trend Analysis

Structure: Structured, Semi-structured

Preparation: Data for analyzing trends

Deliverables: Data charts, Documentation

The purpose of trend analysis is to spot a prevalent trend within a user group
and/or to determine how a trend developed/would develop over time. This exercise helps identify
new opportunities and ideas for concepts or products. Therefore, it is a good idea to conduct
trend analysis during the early stage of the design phase.

Trend analysis as a design research methodology involves collecting data about users as well as
from users. This data is then analyzed to determine a trend and is then analyzed further to
determine its development over time.

However, there are times when a researcher is required to analyze an existing trend within a user
group. In such cases, specific data is collected from the user groups by monitoring the trend
carefully and closely to determine the cause of the trend. Determining the cause of the trend is
more difficult than determining the trend. Again, certain factors such as time of day, season,
geographic location, etc. must be affecting the trend and such factors must, therefore, be
recorded while monitoring the trend.

Types of Trend Analysis

There are three types of trend analysis methods – geographic, temporal and intuitive.

Method Purpose Advantages Disadvantages


To analyze the trend
within or across user
Geographic
groups defined by their
geographic location.
 Easy and reliable.
 The analysis is limited to
 Helpful in figuring our geography.
commonalities and
 May be influenced by
differences between
factors such as culture,
user groups belonging
etc. specific to the user
to the same as well as
groups of the geography.
different geographies.

To analyze the trend
within or across user
Temporal groups defined by
specific time period(s) or
change over time.
  Helpful in figuring
relationships between  Historical data may not
user groups from be an accurate
different generations. representation of trends.
 Helpful in predicting  The trend may not be
future events based on replicable.
those of the past.

To analyze the trend  Over reliance on

within or across user knowledge and logic of
groups based on some Helpful when making futurists/researchers.
Intuitive logical explanation, predictions not backed by large  Prone to researcher bias.
behavioral patterns or amounts of statistical data.  Most difficult form of
other elements perceived trend analysis.
by a futurist.  Not exacting

When quantitative data are arranged in the order of their occurrence, the resulting statistical
series is called a time series. The quantitative values are usually recorded over equal time
interval daily, weekly, monthly, quarterly, half yearly, yearly, or any other time measure.
Monthly statistics of Industrial Production in India, Annual birth-rate figures for the entire world,
yield on ordinary shares, weekly wholesale price of rice, daily records of tea sales or census data
are some of the examples of time series. Each has a common characteristic of recording
magnitudes that vary with passage of time.

Time series are influenced by a variety of forces. Some are continuously effective other
make themselves felt at recurring time intervals, and still others are non-recurring or random in
nature. Therefore, the first task is to break down the data and study each of these influences in
isolation. This is known as decomposition of the time series. It enables us to understand fully the
nature of the forces at work. We can then analyse their combined interactions. Such a study is
known as time-series analysis.

Components of time series

A time series consists of the following four components or elements:

1. Basic or Secular or Long-time trend;

2. Seasonal variations;
 3. Business cycles or cyclical movement; and
4. Erratic or Irregular fluctuations.

These components provide a basis for the explanation of the past behaviour. They help us to
predict the future behaviour. The major tendency of each component or constituent is largely due
to casual factors. Therefore a brief description of the components and the causal factors
associated with each component should be given before proceeding further.

1. Basic or secular or long-time trend: Basic trend underlines the tendency to grow or
decline over a period of years. It is the movement that the series would have taken, had
there been no seasonal, cyclical or erratic factors. It is the effect of such factors which are
more or less constant for a long time or which change very gradually and slowly. Such
factors are gradual growth in population, tastes and habits or the effect on industrial
output due to improved methods. Increase in production of automobiles and a gradual
decrease in production of food grains are examples of increasing and decreasing secular
trend.

All basic trends are not of the same nature. Sometimes the predominating tendency will be a
constant amount of growth. This type of trend movement takes the form of a straight line when
the trend values are plotted on a graph paper. Sometimes the trend will be constant percentage
increase or decrease. This type takes the form of a straight line when the trend values are plotted
on a semi-logarithmic chart. Other types of trend encountered are “logistic”, “S-curyes”, etc.
Properly recognising and accurately measuring basic trends is one of the most important
problems in time series analysis. Trend values are used as the base from which other three
movements are measured.
Therefore, any inaccuracy in its measurement may vitiate the entire work. Fortunately, the causal
elements controlling trend growth are relatively stable. Trends do not commonly change their
nature quickly and without warning. It is therefore reasonable to assume that a representative
trend, which has characterized the data for a past

2. Seasonal Variations: The two principal factors liable for seasonal changes are the
climate or weather and customs. Since, the growth of all vegetation depends upon
temperature and moisture, agricultural activity is confined largely to warm weather in the
temperate zones and to the rainy or post-rainy season in the torried zone (tropical
countries or sub-tropical countries like India). Winter and dry season make farming a
highly seasonal business. This high irregularity of month to month agricultural
production determines largely all harvesting, marketing, canning, preserving, storing,
financing, and pricing of farm products. Manufacturers, bankers and merchants who deal
with farmers find their business taking on the same seasonal pattern which characterise
the agriculture of their area.
The second cause of seasonal variation is custom, education or tradition. Such traditional
days as Dewali, Christmas. Id etc., product marked variations in business activity, travel,
sales, gifts, finance, accident, and vacationing.
3. Seasonal Variations: The two principal factors liable for seasonal changes are the
climate or weather and customs. Since, the growth of all vegetation depends upon
temperature and moisture, agricultural activity is confined largely to warm weather in the
 temperate zones and to the rainy or post-rainy season in the torried zone (tropical
countries or sub-tropical countries like India). Winter and dry season make farming a
highly seasonal business. This high irregularity of month to month agricultural
production determines largely all harvesting, marketing, canning, preserving, storing,
financing, and pricing of farm products. Manufacturers, bankers and merchants who deal
with farmers find their business taking on the same seasonal pattern which characterise
the agriculture of their area.
The second cause of seasonal variation is custom, education or tradition. Such traditional
days as Dewali, Christmas. Id etc., product marked variations in business activity, travel,
sales, gifts, finance, accident, and vacationing.

4. The successful operation of any business requires that its seasonal variations be known,
measured and exploited fully. Frequently, the purchase of seasonal item is made from six
months to a year in advance. Departments with opposite seasonal changes are frequently
combined in the same firm to avoid dull seasons and to keep sales or production up
during the entire year. Seasonal variations are measured as a percentage of the trend
rather than in absolute quantities. The seasonal index for any month (week, quarter etc.)
may be defined as the ratio of the normally expected value (excluding the business cycle
and erratic movements) to the corresponding trend value. When cyclical movement and
erratic fluctuations are absent in a lime series, such a series is called normal. Normal
values thus are consisting of trend and seasonal components. Thus when normal values
are divided by the corresponding trend values, we obtain seasonal component of time
series.
3. Business Cycle: Because of the persistent tendency for business to prosper, decline,
stagnate recover; and prosper again, the third characteristic movement in economic time
series is called the business cycle. The business cycle does not recur regularly like
seasonal movement, but moves in response to causes which develop intermittently out of
complex combinations of economic and other considerations. When the business of a
country or a community is above or below normal, the excess deficiency is usually
attributed to the business cycle. Its measurement becomes a process of contrast
occurrences with a normal estimate arrived at by combining the calculated trend and
seasonal movements. The measurement of the variations from normal may be made in
terms of actual quantities or it may be made in such terms as percentage deviations,
which is generally more satisfactory method as it places the measure of cyclical
tendencies on comparable base throughout the entire period under analysis.
4. Erratic or Irregular Component: These movements are exceedingly difficult to
dissociate quantitatively from the business cycle. Their causes are such irregular and
unpredictable happenings such as wars, droughts, floods, fires, pestilence, fads and
fashions which operate as spurs or deterrents upon the progress of the cycle. Examples
such movements are : high activity in middle forties due to erratic effects of 2nd world
war, depression of thirties throughout the world, export boom associated with Korean
War in 1950.
The common denominator of every random factor it that does not come about as a result
of the ordinary operation of the business system and does not recur in any meaningful
manner.
 5. Mathematical Statement of the Composition of Time Series

6. A time series may not be affected by all type of variations. Some of these type of
variations may affect a few time series, while the other series may be effected by all of
them. Hence, in analysing time series, these effects are isolated. In classical time series
analysis it is assumed that any given observation is made up of trend, seasonal, cyclical
and irregular movements and these four components have multiplicative relationship.
Symbolically :

7. O = T × S × C × I
where O refers to original data,
T refers to trend.
S refers to seasonal variations,
C refers to cyclical variations and
I refers lo irregular variations.
This is the most commonly used model in the decomposition of time series.
There is another model called Additive model in which a particular observation in a time
series is the sum of these four components.
O=T+S+C+I

FOUR IMPORTANT METHODS OF MEASURING THE

TREND ARE -----
(1)Freehand method (Graphical, method)
(2)Semi-average method
(3)Moving Average method
 (4)Method or Least Square

(1)Freehandmethod(Graphical method):-
The freehand method is the simplest of all the methods for measuring the trend. Under this
method, the original data are plotted on a graph paper and a trend line is fitted by inspection. The
trend line or curve should be drawn through the data in such a way that the areas below and
above the trend are equal. They should be exactly equal for the series as a whole and
approximately equal for the first half and last half of the series separately and as per as possible
for each major cycle.
Advantages
(1)The freehand method is the simplest of all the methods for measuring the trend. It is a non-
mathematical method of trend measurement and as such, it can be easily understood by most of
the people.
(2)No calculations are involved in this method. So, it saves time and can be employed when a
quick result is desired.
Disadvantages
(1)Since no mathematical formula is used so in order to fit the trend line, different people may
draw a different trend line from the same data.
(2)The trend line depends on the judgment of the investigator. So, it can be affected by personal
bias.

(2)Semi-average method:-
According to this method, the original data are divided into two equal parts the values of each
part are summed up and averaged. The average of each part is centered in the period of time of
the part from which it has been calculated and plotted on the graph. A straight line shall then be
drawn to pass through the plotted points. This line constitutes the semi-average trend line. When
the numbers of years are odd the middle years are not considered while the data divided into two
equal parts and obtained averages. The semi-average method is sometimes employed when a
straight line appears to be an inadequate explanation of the trend.  

Advantages
(1)This method is simple and there is no probability of personal prejudice and bias affecting the
result.
(2)For a particular series, there will be only one trend line.

Advantages
(1)It assumes that there is a linear relationship between the plotted points which may not be true
in all cases.
(2)Since we have to secure averages, so this method this affected by extreme values.
(3)This method does not eliminate seasonal and cyclic fluctuation.
(4)It does not work well if data is given for a long period.
(3) Moving Average method:-
Moving Average method is a simple device of reducing fluctuations and obtaining trend values
with a fair degree of accuracy. When a trend is to be determined by this method, the average
value for a number of years (months or week) is secured. Then this average is taken as the
normal or trend value for the unit of time falling in the middle of the period covered in the
calculation of the period. In the moving average method determination of the period of moving
average (i.e 3 years, 4years, 7or 8 years etc.) is very important as trend values are affected by the
period of the moving average. The basic principle should be that the period of moving average is
equivalent to the period of the cycle.

Advantages
(1)The greatest advantage of this method is that it eliminates the short time fluctuation that may
be present in the time series.
(2) This method is simple to understand and does not require the use of any complex
mathematical calculation.
(3) If a few more values are added to the time series then it simply results in a few more trend
values which can be easily obtained without distributing the previous calculation.
(4) This method is not subjective because the choice of the period of moving average is
determined by the oscillatory movements of the data and not by the whims of the statistician.

Disadvantages
(1) The main disadvantage of this method is that it does not provide trend values for all the
terms. There are not trend values for some time periods in the beginning and at the end of the
series.
(2) If the fluctuation in the time series is irregular then it is difficult to determine the period of
the moving average.
(3) The method of moving average is developed under the assumption that the trend line is
linear. Thus, for time series with a linear trend (which is generally the case in the economics and
business) these methods either overestimate or underestimate the trend values.
(4) This method cannot be used for predicting or forecasting, which is the main objective for
trend analysis because it does not put forward any mathematical relationship between the variate
under study and time.
 4) Method of Least Square
The method of least squares is a mathematical device which places a line through a series of
plotted points in such a way that the sum of the square of the deviations of the actual points
above and below the trend line is at a minimum. If we sum up the positive and negative
deviations on either side of the fitted line, the sum will be zero. Thus, the sum of the squares of
these deviations obtained will be least compared to the sums of the squares of the deviations
obtained by using another line. It is due to the reason that the method is known as the method of
least squares.

Advantages
(1) This method is based on the fitting of a mathematical equation which makes it highly
objective and different people calculating the trend will reach the same result.
(2) In this method, we determine the relationship in such a way that the sum of the deviation is
minimum.
(3) This method can be used for estimating future or past values.
(4) This method can be used for computing the trend values for all the given time periods in the
series.
(5) In this method, the estimates of the constants (i.e. a and b) are unbiased and have minimum
variance.

Disadvantages

(1) This method is relatively difficult to understand and involves complex calculation, especially
when an exponential or quadratic trend equation is to be fitted.
(2) With the inclusion of one or more values in the series all the calculation have to be done
afresh.
(3) Though the method is used for prediction, such prediction will be successful only if the same
situation continuous to prevail during the period of estimation.
(4) Though the method is objective, the choice of the type of curve to be fitted is a subjective
matter. So, different people may choose different types of curve namely, linear, exponential,
quadratic etc. for analysis of trend.