The components/variations of time series are :
1. Secular trend
2. Seasonal trend .
3. Cyclical variations
4. Irregular/ Random variations.
(1) Secular trend: – ‘The term secular trend/ ‘Trend’ refers to the tendency of the variable to Increase or decrease or to remain steady over a period of time’, e.g. The values of population, prices, sales, literacy etc. are all increasing. As against the death rate, illiteracy, travel by bullock carts is decreasing. The rise or fall may be steep or gradual. But they show increasing trend, if we observe over a sufficiently long period of time.(Here the time ‘t’ > lyear)
(2) Seasonal trend: – The term seasonal variations basically refer to the variations caused annually by the seasons of the year. But also includes the variations of any kind which are periodic in nature and whose period is shorter than one year (Here the time’t’ Ex:-
- Sales of cool drinks, ice creams are more in the summer season
- Sale of stationery will be more in June, July.
- The business commercial Bank may reach a peak around the first week of every month.
- Sales of coconuts are always high on Saturday etc.
Hence a clever Businessman will arrange for the production or to maintain stock accordingly to the needs of the season and will earn maximum profit.
(3) Cyclical Variations:- Cyclical variations are the fluctuations spread over a period of more than one year. (Here time ‘t'< lyear). Most of the Time series relating to Economics and Business show some kind of cyclical variations.
Hence ‘cyclical variation is an oscillatory variation which occurs in four stages, such as (1) Prosperity (2) Decline/Recession (3) Depression and (4) Improvement/Recovery
The business cycle is:-
In Prosperity, the curve increases, the business is in boom, the transaction are much more than expected. After reaching the peak of activities the business declines, the curve slopes down. This is called the period of Decline, in Depression the business activities are at the lowest. Then follows a period of improvement in activities and the curve again starts to rise. In this manner the cycle repeats. The interval of time from one prosperity to the other is called the period of cycle. (Here the time ‘t ‘> OR < 1 year) .
(4) Irregular or Random variations: – Irregular variations are those changes of time series which are irregular in nature and do not show any pattern. The causes of irregular variations are due to accidental happenings such as wars, earth quacks, floods, famine, fire, strikes, etc. These factors are unpredictable. Generally such variations last for a short period.
