Seasonal Decomposition Method

Presented by
Vineet
Bhat
Ayush
Sharma
Mohit
Gandotra
Pankaj
Jandial

Sandeep Patyal
 Decomposition is an approach to the analysis of time
series which involves the identification of the component
factor that influence each of the value in the series.
Each component is identified separately.
Projection of each of the component is combined to
produce forecast for future value of the time series.
Decomposition method used for both short term and
long term forecasting.
This method is also used to simply displays the
underlying growth or decline of a time series,or to adjust
the series by elimanating one or more of the component
• To understand decomposition of time series
firstly we have to understand four
components that are:
• Trend
• Cyclical
• Seasonal
• Irregular
• Trend:
• It is an component that represent the underlying
growth or decline in a time series.
• Example:
• It is produced by population change,
inflation,technological change , and productivity
increases.
• It is donated by T
•
• Cyclical:
• It is of a series of wavelike fluctuations or
cycles of more then one year’s duration.
• Example : changing economics condition
generally produce cycle.
• It is donated by C
• Seasonal:
• It is a fluctuation are typically found in
quarterly, monthly, weekly, data.
• it occurs because of the influence of the
weather, or because of calendar – related
event such as school vocation and national
holidays.
• It is donated by S
• Irregular:
• these component consist of unpredictable or
random fluctuations.
• These fluctuation are the result of a large no
of event that individually may not be
particularly important but whose combined
effect could be large .
• It is donated by I
The analyst must see study how these component
related to the original series .
This is done by specifying a model (mathematical
relationship) that express the time series variable Y
in terms of the components T, C, S, and I.
T=trend
C=cyclical
S=seasonal
I=irregular
• Additive model:
• A model that treat the time – series values as a sum of
the component is called an additive component model.
• Yt=Tt+Ct+St+It

• Multiplicative model:
• A model that treat the time-series value as the product of
the component is called multiplicative component model.
• Yt=Tt*Ct*St*It
• Additive model is not mostly used the recent time
because it give a simple calculation of addition of
the series which can be calculated by other
simple methods like moving average methods.
• Mostly multiplicative model is used in the recent
time which works best when the variability of the
time series increases with the level.
• We can also used winter exponential smoothing
methods for seasonality.