Time series

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Time series

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You are on page 1of 88

PRESENTATION

GROUP 5

TOPIC

Simple Introduction to the relation

between function values under cyclic

behavior (Time Series).

Ergodic Behavior

Group Members

Marnel Altius 14/0935/2686

Juan Peterkin 13/0935/2213

Javed Khan 13/0935/2750

Godfrey Bess 14/0935/0202

Yonnick Adolph 14/0935/2094

Delon Thomas 13/0935/1787

TOPICS COVERED:

1.) Introduction into Time series

2.)Introduction in Ergodic Theory

3.) Time series decomposition

4.) Applications

Definition of a time series

Purpose of Time series analysis

Components of a times series

It is a statistical series which tells how data

This data is measured at equally spaced time

intervals.

A time series is a sequential set of data

points, measured typically over successive

times.

Times series can be categorized depending on

data.

Continuous series data allow one to find the state

of a system at any time within the series at the

cost of much larger sample size.

Discrete series are very common in electronic

sensors such as those used to measure weather

conditions and these are used over much longer

durations than the former to allow for data

compression.

analysis

Ideally, Time the analysis of a time series

should aid in the identification of patterns in

correlated data .

Once the system under investigation is

understood to a certain degree, it can then be

modeled and predictions of short-term trends

can be made.

In addition, deviations of a specified size from

the model could indicate problems in the

system.

components

A time series generally is composed of

The Trend,

Cyclical component,

Seasonal component,

Irregular components.

The Trend

It is the general tendency of a time series to

period of time.

It can be linear, non-linear, i.e. exponential,

quadratic

Seasonal variations

This is the regular wavelike fluctuations of

constant period.

They have a period of no longer than a year.

Cyclical variation

They are medium-term quasi regular

trend.

They repeat in cycles (Wavelike).

Last longer than a year.

Irregular or random

variations

They are fluctuations due to unpredictable

pattern. The irregular component is often called the

Random process

Stationary process

ErgodicTheory

Random process

Random process is a process representing

values over time.

Since a random process is a function of time

we can find the averages over some period of

time, T , or over a series of events.

Ergodic theory requires a type of process

called the stationary process

Stationary process

Inmathematicsandstatistics, astationary

processwhosetotal probability

distributionand parameters such as

themeanandvariance, do not change when

shifted in time and does not follow any trends.

It can be defined mathematically by the

following:

Let {Xt} be a random process and

of the

joint distribution of

at times

Then

is said to be stationary if, for all

for all

and for all

Since

function of time

is not a

ErgodicTheory

A simple definition would be the study of the

evolving in time.

Ergodic Theory uses techniques and

examples from many fields such as probability

theory, statistical mechanics, number theory

etc.

ErgodicProcess

Ergodic-This term denotes a system which

sufficient time, will return to a state close

to the initial one.

Astochastic process is said to beergodicif its

variance) can be deduced from a single,

sufficiently long sample (realization) of the

process.

(expected values) ARE equal to the time

averages.

Thus everysequence orsample of sufficient

size isequallyrepresentative of the whole.

Example

TakeNresistors (Nshould be very large) and plot the voltage

hasthermal noiseassociated with it and it depends on the

temperature.

For each resistor you will have a waveform.

The calculated average value of that waveform gives you the

time average.

Also note that you have Nwaveforms as we haveNresistors.

TheseNplots are known as an ensemble.

Now take a particular instant of time in all those plots and

find the average value of the voltage.

That gives you the ensemble average for each plot. If both

ensemble average and time average are the same then it is

ergodic.

Ergodic Theorems

Since the main concern of ergodic theory is

precise information is required to study these

systems.

More precise information is provided with the

use of ergodic theorems.

Time Series Models

Trend Analysis

Seasonal Variation

Decomposition of a Time

series

decomposition.

This allows one to predict the future by using

In other time series, The amplitudes of the other

components are relative to the trend. In this situation,

a multiplicative model is usually appropriate.

G=TxSxIxC

Where:

G Observed Series

T Trend

S Seasonal Component

I Irregular Component

C - Cyclic Component

1. Additive Decomposition Model

In some time series, the amplitude of both the

seasonal and irregular variations is invariant to

trend. In such cases, an additive model is

appropriate.

G=T+S+I+C

cyclical fluctuations:

G=TxC

C Cyclic Component as an normalized

index

time series are not necessarily independent

and they can affect one another;

whereas in the additive model it is assumed

that the four components are independent of

each other.

COMBINATION OF MULTIPLICATIVE

AND ADDITIVE MODEL

Other Models exist which usually take the

multiplicative elements, such as:

y=S+TxCxI

or

y=C+TxSxI

Trend Analysis

Trend Analysis can be done using a variety of

In this case the moving average method is a

simple and effective method for simple

scenarios.

Trend Analysis

This refers to collecting data with the aim of

Linear Filtering:

Set thus detecting trends or seasonal components.

A simple moving average (SMA) is a arithmetic mean

where sections of data are averaged using constant

widths in a larger sample of data.

called smoothing the series.

First, determine the moving totals of the

same period.

Then find the moving averages from the

totals.

Regression can also be used to find the trend

Both regression and smoothing can be used

to improve results.

Exponential Smoothing

Unlike SMA, this technique involves the automatic weighting of past data

with weights that decrease exponentially with time. That is, the older

observations get a decreasing weighting while new observations receives a

greater weighting.

New forecast = old forecast + (latest observation old forecast)

= 2/(m+1)

m = number of obervations comparable to the SMA

where is the smoothing constant and can be between 0 to 1.

adjusted to observed data faster.

Actual

Exponential forecasts

Quarter

Sales (units)

values 0.2

values 0.8

Spring

450

Summer

440

448

442

Fall

460

452

456

Winter

480

464

476

38

Linear Trend

When

the graph of a trend component takes the shape of a straight line the forecast

value can be determined by the linear regression method of the following equations:

Least squares method:

b1 = n() ()()

n() ()2

b0 = ( b1 /n

Where- b1 is the gradient of a line

b0 is the intercept of the y axis

n is the number of values

In estimating the trend in a time series, there

successive time frames.

For those systems, nonlinear methods such as

exponential curve fitting must be used

instead.

log I = m.log.t + log.k

Where,

y = Trend

x = time

a = y intercept

m = gradient of the line

Then use the least squares method to find the trend equation.

proportion overtime. Data taking this form can

be approximated by an equation referred to as

the exponential curve:

the values of a and m.

Seasonal Variation

By definition, is repetitive and predictable

or less.

Time intervals must be measured in small

quarters.

Seasonal Index/offset- It is a ratio or an offset

relative to the observation without the effect

Step 1

the moving averages of the original observations

are calculated.

G = [ x1 + x2 + x3 xn

+xn+1 ]/n

OR G = [x1 + x2 + x3 xn+1 ]/n

Step 2

Because (T+C+S+I)-(T+C)= S+I

Difference between observed value and the

moving average which is => X G = D

Step 1 + 2

Step 3

The irregular component is reduced calculating

the averages S' over all years, one for each

quarter. It is assumed that the irregular

component will cancel when summed together.

Step 4

The final seasonal estimates have to sum up

to 0. A correction value is used to allow this to

happen.

Step 5

When the seasonal figures have been

performed by a subtraction of the seasonal

factors from the original data series.

Seasonal adjustment of a

multiplicative series

Step 1

First the symmetric moving averages of the

observations are calculated by G=TC as a first

estimate over the trend and the cycle.

Step 2

T and C are then removed from the series, and

this is done in a multiplicative model by division,

i.e. the fraction Q is calculated

Step 3

The different seasonal estimates are joint,

exactly as it was done in the additive

model, by calculation of an average over the

years, S.

Step 4

The averages S' are normalized so that the

calculated seasonal factors each varies

around 1, i.e. they sum up to 4. The

normalization is here performed by a

multiplication of each seasonal factor with 4,

and then dividing each factor with their sum.

Step 5

the seasonal adjustment is performed by dividing

the original series with the seasonal factors.

X/S=TCSI/S=TCI

Residuals

They are what remains after the seasonal,

have been removed

variable of interest) and the value of G

predicted by the model:

Residual = G observed - G predicted

relative to the data and any assumptions you

might make in the analysis.

Effect can either be large or negligible

Can cause an increase or a decrease

series

They mask the trends and seasonal

the forecast.

Large residual large fluctuations forecast

badly affected

Small residual small fluctuations forecast

not badly affected

Residuals vs Predicted

Values

If the model gives an adequate fit to the data and

distributed residuals is satisfied, the plot of the

residuals versus predicted values would show no

pattern or trend.

When you observe a nonrandom pattern, you

One pattern commonly observed is an increasing

variation in the residuals as the predicted values

increase (V-shaped pattern or megaphone shape).

data. The V-shaped pattern suggests the

variation increases with the average.

A curved relationship between the residuals

terms should be included in the model. With

several predictor (x) variables, it often helps

to plot the residuals versus each x variable to

pinpoint the source of the curvature.

Applications

Applications

Trend Analysis can be applied to a wide cross

which are:

Population dynamics

Price dynamics

Productivity dynamics

Quality Control

Forecasting

Applications

Importance of Seasonal Variation

Knowledge of past trends can be projected

into the future

To measure seasonal effect

To eliminate seasonality

It aids short term forecasting and planning.

Sources

Time Series and Forecasting

->www.mcgrawhill.ca/college/lind

http://web.mit.edu/13.42/www/handouts/readi

ng-randomprocesses.pdf

However state why whichever one was used.

Question 1

The enrolment in the School of Engineering at

Years

Quarter

observed values

2001

2002

2003

2004

2005

Winter

Spring

Summer

Fall

Winter

Spring

Summer

Fall

Winter

Spring

Summer

Fall

Winter

Spring

Summer

Fall

Winter

Spring

Summer

Fall

2033

1871

714

2318

2174

2069

840

2413

2370

2254

927

2704

2625

2478

1136

3001

2803

2668

b. Interpret the quarterly pattern of

surprise you?

c. Compute the trend equation

multiplicative

Normalized

Quaterly

Average

1.261950109

1.177673797

1.102211847

0.458164246

additive

Deseasonaliz

ed Values

1726

1697

1558

1837

1846

1877

1833

1912

2012

2045

2023

2143

2229

2248

2479

2378

2380

2421

Normalize Deseasonalize

d Quaterly

d Values

Average

1655

1659

1847

542.87760

1775

42

377.90885

1796

42

212.29427

1857

08

1133.0807

1973

3

1870

1992

2042

2060

2161

2247

2266

2269

2458

2425

2456

3500

3000

2500

f(x) = 49.29x + 1567.66

2000

observed values

Deseasonalized Values

1500

1000

500

0

1

10

11

12

13

14

15

16

17

18

Question 2

Find the trend using a 4 year simple moving

average.

Year

Sales

1996

58436

1997

59994

1998

61515

1999

63182

2000

67989

2001

70448

2002

72601

2003

75482

2004

78341

2005

81111

the trend.

average method to the data set? Use

exponential smoothing using a coefficient of

0.5 and compare with the simple moving

average.

c.Why is there no seasonal component in this

3 year moving

Average

59981.67

61563.67

64228.67

67206.33

70346

72843.67

75474.67

78311.33

4 year moving

Average

60781.75

63170

65783.5

68555

71630

74218

76883.75

EMA 0.5

57657

59233.5

60681.5

60778.5

66759.5

69371.5

71160.5

74052.5

76956

85000

EMA is more

80000

year SMA or it follows

the actual data more

closely

75000

Sales

70000

Linear (Sales)

4 year moving

Average

65000

EMA 0.5

60000

55000

50000

10

Question 3

The inventory turnover rates for Bassett

Year

2001 I

II

III

IV

2002 I

II

III

IV

2003 I

II

III

IV

2004 I

II

III

IV

2005 I

II

III

IV

Quarter

Obsevered

Value X

4.4

6.1

11.7

7.2

4.1

6.6

11.1

8.6

3.9

6.8

12

9.7

5

7.1

12.7

9

4.3

5.2

10.8

7.6

b. Deseasonalize the data

multiplicative

Correct

Deseasi

ed

onalize

Quarterl

d

y

Values

Average

7.9

7.4

7.9

6.3

0.55537

6

7.4

0.82613

8

8.0

1.48149

9

7.5

1.13698

7

7.6

7.0

8.2

8.1

8.5

9.0

8.6

8.6

7.9

7.7

6.3

7.3

6.7

additive

Correct

Deseasi

ed

onalize

Quarterl

d

y

Values

Average

7.9

7.5

7.9

6.1

3.50026

7.6

1.38464

8.0

3.83411

5

7.3

1.05078

1

7.5

7.4

8.2

8.2

8.6

8.5

8.5

8.9

7.9

7.8

6.6

7.0

6.5

14

12

10

8

Obsevered Value X

Deseasionalized Values

0

1

10

11

12

13

14

15

16

17

18

19

20

Question 4

Sales of roof material, by quarter, since 1999

shown below (in $ thousands).

Year

1999

2000

2001

2002

2003

2004

2005

Quarter

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

Obsevered

Value X

210

180

60

246

214

216

82

230

246

228

91

280

258

250

113

298

279

267

116

304

302

290

114

310

321

291

120

320

sales.

b.Deseasonalize the data

multiplicative

Correct

ed

Deseasi

Quarter onalize

ly

d

Averag Values

e

177

161

137

196

1.1875

02

180

1.1192

36

193

0.4382

42

187

1.2550

19

183

207

204

208

223

217

223

258

237

235

239

265

242

254

259

260

247

270

260

274

255

Correct

ed

Deseasi

Quarter onalize

ly

d

Averag Values

e

168

154

185

189

42.339

29

172

26.005

95

190

124.85

1

207

56.505

95

173

204

202

216

223

216

224

238

241

237

241

241

247

260

264

239

253

279

265

245

263

350

300

250

200

Obsevered Value X

Deseasionalized Values

150

100

50

0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

produce. The numbers of pairs produced (in

thousands) by quarter are:

Year

Quarter

Obsevered Value X

2000

2001

2002

2003

2004

2005

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

I

II

III

IV

142

312

488

208

146

318

512

212

160

330

602

187

158

338

572

176

162

380

563

200

162

362

587

205

indexes.

b. Interpret the typical seasonal pattern

c. deseaonalize the data

Corrected

Quarterly

Average

Deseasionalize

d Values

1.819307881

0.544666132

0.518127331

1.117898656

274

279

268

382

282

284

281

389

309

295

331

343

305

302

314

323

313

340

309

367

313

324

323

376

Corrected

Quarterly

Average

Deseasionalized

Values

242.0759608

-94.09070583

-154.3740392

28.67596084

296

283

246

302

300

289

270

306

314

301

360

281

312

309

330

270

316

351

321

294

316

333

345

299

700

600

500

400

300

200

100

0

1

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

Step one: Calculate Moving Averages G using the equation ([X 1/2]+X2+X3+X4+[X5/2])/4 or

(X1+X2+X3+X4)/4

Step two: Remove the trend and cyclical component and compute the value Q, where Q=X/G.

Step three: For the same quarter of each year find the sum of the average of the Q values.

This value is S.

Step four: find the normalized averages or seasonal factor S using the equation S= (4S/)

Step five: the seasonal adjustment is conducted by dividing the X values by the seasonal

factor S.

Additive method:

Step one: Calculate Moving Averages G using the equation ([X 1/2]+X2+X3+X4+[X5/2])/4 or

(X1+X2+X3+X4)/4

Step two: Remove the trend and cyclical component and compute the value Q, where Q=X-G.

Step three: For the same quarter of each year find the sum of the average of the Q values.

This value is S.

Step four: find the normalized averages or seasonal factor S using the equation S=S - ()/4

Step five: the seasonal adjustment is conducted by subtracting the X values by the seasonal

factor S.

Trend equations

Q1) = 49.29022498t + 1567.660482 (multi)

48.5059232t + 1584.071334 (add)

Q2) = 2624.575758t +544747.3333

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