The Components of Time Series

The factors that are responsible for bringing about changes in a time series, also called the components of time series, are as follows:

1. Secular Trends (or General Trends)
2. Seasonal Movements
3. Cyclical Movements
4. Irregular Fluctuations

 

Secular Trends

The secular trend is the main component of a time series which results from long term effects of socio-economic and political factors. This trend may show the growth or decline in a time series over a long period. This is the type of tendency which continues to persist for a very long period. Prices and export and import data, for example, reflect obviously increasing tendencies over time.

 

Seasonal Trends

These are short term movements occurring in data due to seasonal factors. The short term is generally considered as a period in which changes occur in a time series with variations in weather or festivities. For example,  it is commonly observed that the consumption of ice-cream during summer is generally high and hence an ice-cream dealer’s sales would be higher in some months of the year while relatively lower during winter months. Employment, output, exports, etc., are subject to change due to variations in weather. Similarly, the sale of garments, umbrellas, greeting cards and fire-works are subject to large variations during festivals like Valentine’s Day, Eid, Christmas, New Year’s, etc. These types of variations in a time series are isolated only when the series is provided biannually, quarterly or monthly.

 

Cyclic Movements

These are long term oscillations occurring in a time series. These oscillations are mostly observed in economics data and the periods of such oscillations are generally extended from five to twelve years or more. These oscillations are associated with the well known business cycles. These cyclic movements can be studied provided a long series of measurements, free from irregular fluctuations, is available.

 

Irregular Fluctuations

These are sudden changes occurring in a time series which are unlikely to be repeated. They are components of a time series which cannot be explained by trends, seasonal or cyclic movements. These variations are sometimes called residual or random components. These variations, though accidental in nature, can cause a continual change in the trends, seasonal and cyclical oscillations during the forthcoming period. Floods, fires, earthquakes, revolutions, epidemics, strikes etc., are the root causes of such irregularities.