Time Series

“The Art of Forecasting”

 What Is Forecasting?

 Process of predicting a
future event
 Underlying basis of
all business decisions
 Production
 Inventory
 Personnel
 Facilities
  An ordered sequence of values of a variable at
equally
Applications:
 Obtain an understanding of the underlying forces.
 Structure that produced the observed data
Time Series  Fit a model and proceed to forecasting, monitoring
or even feedback and feedforward control.
 Time Series Analysis is used for many applications such as

o Legal Analysis
o Medical Analysis
o Budgetary Analysis
o Stock Market Analysis
o Yield Projections
o Process and Quality Control
o Inventory Studies
o Utility Studies
o Census Analysis
o and many, many more...
  Overall Upward or Downward Movement
 Data Taken Over a Period of Years
 Persistent, overall upward or downward pattern
 Due to population, technology etc.
 Several years duration

Trend
Component Upward trend
Sales

Time
  Upward or Downward Swings
 May Vary in Length
 Usually Lasts 2 - 10 Years
 Repeating up & down movements
 Due to interactions of factors influencing
economy

Cyclical
Component yc le
C
Sales

Time
  Upward or Downward Swings
 Regular pattern of up & down fluctuations
 Due to weather, customs etc.
 Occurs within one year

Seasonal
Component

i nt er
W
Sales

Time (Monthly or Quarterly)

  Erratic, unsystematic, ‘residual’ fluctuations.
.
 Due to random variation or unforeseen events
Irregular  Union strike
Component  War

 Short duration & nonrepeating.

 METHODS TO
FIND SECULAR
TRENDS
 GRAPHICAL METHOD

 In this method the given time series data are plotted on graph paper by taking
time on X-axis and the other variable on Y-axis.
 The graph obtained will be irregular
Points must be kept in mind in drawing a freehand smooth curve:
 1. That the curve is smooth.
 2. That the numbers of points above the line or curve are equal to the points
below it.
 MERITS: DEMERITS:

GRAPHICA  Simple method

L METHOD  Flexible method  Subjective method.

 Observations are  Method have a little
relatively stable value
WORKED EXAMPLE
 SEMI-AVERAGE METHOD
1. Averages of the two halves of a series.

2. Series is divided into two equal parts (halves) and the

arithmetic mean of the values of each part (half) is
calculated.

3. Data is for even number of years, it can be easily divided

into two halves.

4. Odd number of years, we leave the middle year of the time

series and two halves constitute the periods on each side
of the middle year.
 DEMERITS:
MERITS

SEMI-
AVERAGE  Method can give only
 Simple method linear trend
METHOD
 Objective method  Crude method of
measuring trend
WORKED EXAMPLE
 How Trend Analysis helps in
the Legal Field.
• 1. Analyse the crime trend.

• 2. Helps in estimating Legal Job vacancies.

• 3. Deploy more police force in the high crime

regions.

• 4. Helps in creating stricter law relating to the

recurring crimes.
THANK YOU
Name: Sudhanshu Singh
SAP ID: 81022019473
BBA.LLB 2025
SUBJECT: Economics IV
SEM IV