TAMIL NADU NATIONAL

LAW SCHOOL

B.COM.LL.B. (HONS.),

FIFTH SEMESTER
2016

BUSINESS STATITICS PROJECT

ON
ANALYSIS OF TIME SERIES

PROJECT BY:
K.VISHAL
BCO140066

SUBMITTED TO:Dr. T.S. AGILLA

ASST. PROFESSOR OF LAW

Declaration

I, K.VISHAL do hereby declare that the project entitled Analysis of Time Series
submitted to Tamil Nadu National law school in partial fulfilment of requirement of award of
degree in undergraduate in law is a record of original work done by me under the supervision
and guidance of Dr. T.S. Agilla, Asst. Professor of Law Tamil Nadu National law school and
has not formed basis for award of any degree or diploma or fellowship or any other title to
any other candidate of any university.

K.VISHAL
B.Com, LL.B (Hons)

ACKNOWLEDGEMENTS

At the outset, I take this opportunity to thank my Professor Dr. T.S. Agilla who has been of
immense help during moments of anxiety and torpidity while the project was taking its
crucial shape.
Secondly, I convey my deepest regards to the Vice Chancellor and the administrative staff of
TNNLS who held the project in high esteem by providing reliable information in the form of
library infrastructure and database connections in times of need.
Thirdly, the contribution made by my parents and friends by foregoing their precious time is
unforgettable and highly solicited. Their valuable advice and timely supervision paved the
way for the successful completion of this project.
Finally, I thank the Almighty who gave me the courage and stamina to confront all hurdles
during the making of this project.

Table of Contents
1.

INTRODUCTION................................................................................................ 5
1.1 AIMS & OBJECTIVES........................................................................................ 5
1.2. SCOPE & SIGNIFICANCE OF THE STUDY...........................................................5
1.3. RESEARCH METHODOLOGY............................................................................5

2. Introduction to Statistics........................................................................................... 6
2.1 Meaning and Definition of Statistics.........................................................................6
3. Time Series Analysis- An Introduction...........................................................................7
3.1 Trends, Seasonality, Cycles and Residuals..................................................................9
3.2 Utility of Time Series Analysis...............................................................................9
4. Components of Time Series...................................................................................... 10
4.1 Multiplicative Model.......................................................................................... 11
4.2 Additive Model................................................................................................. 11
5. Measurements of Secular Trend.................................................................................12
5.1 Freehand Method................................................................................................. 12
5.2 Method of Averages.............................................................................................. 13
5.2.1 Moving Averages............................................................................................ 13
5.2.1.1. Odd and Even Number of Years....................................................................15
5.2.2. Weighted Moving Averages..............................................................................17
5.2.3. Semi-Average Method..................................................................................... 19
6. CONCLUSION..................................................................................................... 23
BIBLIOGRAPHY..................................................................................................... 24

STATISTICAL TECHNIQUES: ANALYSIS OF TIME SERIES

1. INTRODUCTION
1.1 AIMS & OBJECTIVES
The researcher aims to study the concept of time series analysis by studying about the
utility, different variations and the components of time series.
The researcher would also like to study the two different models of representation of
time series- the Additive Model and the Multiplicative Model.
The researcher through illustrations will study the application of the moving averages,
weighted averages and the semi-average method in calculating time series values.
1.2. SCOPE & SIGNIFICANCE OF THE STUDY
This research project will help in a study of how statistical data is affected by time series
components like trends, seasonal or cyclical variations. The researcher feels the true
importance of such study is because the research project focuses on the additive model of
representation of time series problems and the illustrations provided in better understanding
the moving averages and weighted averages method of solving and organizing statistical data.
This project is limited only to the additive model of representation of secular trend
and time series analysis. It does not seek to explain the multiplicative model. This project is
made on both primary and secondary data and some of the procuring of primary data was also
restricted due to constraints of time and resources.
1.3. RESEARCH METHODOLOGY
This is a doctrinal research project and the relevant material for this project has been
collected from primary and secondary sources. The doctrinal research is a type of research
based on principles and propositions made earlier. It is based largely on secondary sources
like books, and various websites. For the purpose of the said research project the researcher
has collected the relevant material form books on statistics and specifically articles and books
on measures of dispersion.

2. Introduction to Statistics

One of the most important tasks before the economists and businessmen these days is to make
estimates for the future. For example, a businessman is interested in finding out his likely sales in the
year 2016 or as a long term planning in 2020 or the year 2030 so that he could adjust his production
accordingly and avoid the possibility of either unsold stock or inadequate production to meet the
demand. Similarly an economist is interested in estimating the likely population in the coming year so
that proper planning can be carried out with regard to food supply, jobs for people, etc. However the
first step in making estimates for the future consists of gathering information from the past, in this
connection one usually deals with statistical data which are collected, observed or recorded at
successive intervals of time. Such data are generally referred to as time-series. Thus when we
observe numerical data at different points of time the set of observations is known as time series. For
example, if we observe production, sales, population, import, export, etc. at different points, say over
the last 5 or 10 years, the set of observations formed shall constitute time series. Hence in the analysis
of the time series, time is the most important factor because the variable is related to time which may
be either year, month, week, day, hour or even minutes or seconds.

2.1 Meaning and Definition of Statistics

In the beginning, it may be noted that the word statistics is used rather curiously in two
senses plural and singular. In the plural sense, it refers to a set of figures or data. In the
singular sense, statistics refers to the whole body of tools that are used to collect data,
organize and interpret them and, finally, to draw conclusions from them. It should be noted
that both the aspects of statistics are important if the quantitative data are to serve their
purpose. If statistics, as a subject, is inadequate and consists of poor methodology, we could
not know the right procedure to extract from the data the information they contain. Similarly,
if our data are defective or that they are inadequate or inaccurate, we could not reach the right
conclusions even though our subject is well developed.
A.L. Bowley 1 has defined statistics as: (i) statistics is the science of counting, (ii)
Statistics may rightly be called the science of averages, and (iii) statistics is the science of
measurement of social organism regarded as a whole in all its manifestations. Boddington2
defined as: Statistics is the science of estimates and probabilities. Further, W.I. King has
defined Statistics in a wider context, the science of Statistics is the method of judging
1 C.P.Sanger, Review of Elements of Statistics by A.L.Bowley, The Economic Journal, Vol.11, (1901)
pp.193-197

collective, natural or social phenomena from the results obtained by the analysis or
enumeration or collection of estimates. Seligman explored that statistics is a science that deals
with the methods of collecting, classifying, presenting, comparing and interpreting numerical
data collected to throw some light on any sphere of enquiry. Spiegal defines statistics
highlighting its role in decision-making particularly under uncertainty, as follows: statistics is
concerned with scientific method for collecting, organising, summa rising, presenting and
analyzing data as well as drawing valid conclusions and making reasonable decisions on the
basis of such analysis.

Accepted definitions:-

Morris Hamburg -A time series is a set of statistical observations arranged in

chorographical order.

Patterson-A time series consists of statistical data which are collected, recorded, observed
over successive increments.

It is clear from the above definitions that time series consists of data arranged chronographically. Thus
if we record the data relating to population, per capita income, prices, production, etc., for the last
5,10,15,20 years or some other time period, the series so emerging would be called time series.
It should be noted that the term time series is usually used with reference to economic data and the
economists are largely responsible for the development of the techniques of time series analysis.
However the term time series can apply to all other phenomenon that are related to time such as the
number of accidents that occur in a day, the variation in the temperature of a patient during a certain
period, number of marriage taking place during a certain period, etc.

Statistics should be placed in relation to each other. If one collects data unrelated to each
other, then such data will be confusing and will not lead to any logical conclusions. Data
should be comparable over time and over space3.

2 Boddington, Statistics and their Application to Commerce, H.F. Lynch & Co. Ltd., Cornell
University, (1921)
3 Bloomfield .P, Fourier analysis of time series: An introduction. New York: Wiley.

3.Utility of Time Series:The analysis of time series is of great significance not only to the economist and businessman but also
to the scientist, astronomist, geologist, sociologist, biologist, researcher, worker, etc. for the following
reasons:

It helps in understanding past behavior. By observing data over a period of time one can
easily understand what changes have taken place in the past. Such analysis will be extremely

helpful in predicting the future behavior.

It helps in planning future operations .Plans for the future cannot be made without forecasting
events and relationships they will have. Statistical techniques have been evolved which
enables rime series to be analysed in such a way that the influences which have determined
the form of that series may be ascertained. If the regularity of occurrence of any feature over a
sufficiently long period could be clearly established then, within limits, prediction of probable

future variations would become possible. Thus time series helps in planning future operations.
It helps in evaluating current accomplishments. The actual performance can be compared with

the expected performance and the cause of variation analysed.

It facilitates comparison. Different time series are often compared and important conclusions
are drawn there from. However one should not be led to believe that by time series analysis
one can foretell with 100 per accuracy the course of future events. After all, statisticians are

not foretellers.
When this time series is implemented in a business one can undoubtedly improve
substantially in conducting his business better as he will be better prepared with the scientific
estimation which is bound to happen more than guesswork.

3.1 Trends, Seasonality, Cycles and Residuals

One simple method of describing a series is that of classical decomposition. The notion is that
the series can be decomposed into four elements:

Trend (T) long term movements in the mean;

Seasonal effects (I) cyclical fluctuations related to the calendar;

Cycles (C) other cyclical fluctuations (such as a business cycles);

Residuals (E) other random or systematic fluctuations.

The idea is to create separate models for these four elements and then combine them, either
additively X = T + I + C + E or multiplicatively X = T I C E.
If we study irregular curve year by year, we see that in each year the curve starts with a low
figure and reaches a peak about the middle of the year and then decreases again. This type of
fluctuation, which completes the whole sequence of changes within the span of a year and has
about the same variation, is called seasonal variation. Furthermore, looking at the broken
curve superimposed on the original irregular curve, we find pronounced fluctuations moving
up and down every few years throughout the length of the chart. These are known as business
cycles or cyclical fluctuations. They are so called because they comprise a series of repeated
sequence just as a wheel goes round and round. Finally, the little saw tooth irregularities on
the original curve represent what are referred to as irregular movements4.
Additionally, time series analysis techniques may be divided into parametric and non
parametric methods. The parametric approaches assume that the underlying stationary
stochastic processes have a certain structure which can be described using a small number of
parameters (for example, using an autoregressive or moving average model). In these
approaches, the task is to estimate the parameters of the model that describes the stochastic
process. By contrast, non-parametric approaches explicitly estimate the covariance or
the spectrum of the process without assuming that the process has any particular structure.
3.2 Utility of Time Series Analysis
Analysis of time series is of great significance not only to the economist and businessman but
also to the scientist, astronomist, geologist, sociologist, biologist research worker, etc.
It helps in understanding past behavior. By observing data over a period of time one
can easily understand what changes have taken place in the past. Such analysis will
be extremely helpful in predicting the future behavior.
It helps in planning future operations. Plans for the future cannot be made without
forecasting events and the relationship they will have. Statistical techniques have
been evolved which enable time series to be analyzed in such a way that the
influences which have determined the form of that series may be ascertained. If the
4 Supra note 3 (S.P. Gupta)

regularity of occurrence of any feature over sufficiently long period could be clearly
established then, within limits predication of probable future variations would
become possible. Thus time series analysis helps us to cope with uncertainty about
the future.
It helps in evaluating current accomplishments. The actual performance can be
compared with the expected performance and the cause of variation analysed. If
expected sale for 2013-14 was 10000 refrigerators and the actual sale was only 9000
one can investigate the cause of the shortfall in achievement. Time Series Analysis
will enable us to apply the scientific procedure of holding other things constant as
we examine one variable at a time. For example, if we know how much the effect of
seasonality on business is we may devise ways and means of ironing out the seasonal
influence or decreasing it by producing commodities with complementary seasons.
It facilitates comparison. Different time series are often compared and important
conclusions are drawn therefrom. However, one should not be led to believe that by
time series analysis one can foretell with 100 percent accuracy that course of future
events. After all statisticians are not foretellers. This could be possible only if the
influence of the various forces which affect these series such as climate, customs and
traditions, growth and decline factors and the complex forces which produce business
cycles would have been regular in their operation. However, the facts of life reveal
that this type of regularity does not exist. But this then does not mean that time series
analysis is of no value. When such analysis is coupled with a careful examination of
current business indicators one can undoubtedly improve substantially upon
guestimates (estimates based upon guesswork) in forecasting future business
conditions5.

4. Components of Time Series

The analysis of time series consists of two major steps:
1. Identifying the various forces (influences) or factors which produce the variations in the
time series, and
2. Isolating, analysing and measuring the effect of these factors separately and independently,
by holding other things constant.
5See, S.P.Gupta, Statistical Methods, Sultan Chand & Sons, Forty-fourth Edition, (2015) pp.613

10

The purpose of decomposition models is to break a time series into its components: Trend
(T), Cyclical (C), Seasonality (S), and Irregularity (I). Decomposition of time series provides
a basis for forecasting. There are many models by which a time series can be analysed; two
models commonly used for decomposition of a time series are discussed below.

4.1 Multiplicative Model

This is a most widely used model which assumes that forecast (Y) is the product of the four
components at a particular time period. That is, the effect of four components on the time
series is interdependent.
Symbolically, it will be represented like this: Y=T x C x S I
The multiplicative model is appropriate in situations where the effect of S, C, and I is
measured in relative sense and is not in absolute sense. The geometric mean of S, C, and I is
assumed to be less than one. For example, let the actual sales for period 20 be Y20 = 423.36.
Further let, this value be broken down into its components as: let trend component (mean
sales) be 400; effect of current cycle (0.90) is to depress sales by 10 per cent; seasonality of
the series (1.20) boosts sales by 20 per cent. Thus besides the random fluctuation, the
expected value of sales for the period is 400 0.90 1.20 = 432. If the random factor
depresses sales by 2 per cent in this period, then the actual sales value will be 432 0.98 =
423.366.
4.2 Additive Model
In this model, it is assumed that the effect of various components can be estimated by adding
the various components of a time-series. It is stated as: Y=T + C + S + I- the Additive model
Here S, C, and I are absolute quantities and can have positive or negative values. It is
assumed that these four components are independent of each other. However, in real-life time
series data this assumption does not hold good.

5. Measurements of Secular Trend

The principal methods of measuring trend fall into following categories:
1. Free Hand Curve methods
2. Method of Averages
6 Box, G. E. P. and Jenkins, G. M., Time Series Analysis: Forecasting and Control, Revised Edition, HoldenDay, San Francisco. (1976)

11

The time series methods are concerned with taking some observed historical pattern for some
variable and projecting this pattern into the future using a mathematical formula. These
methods do not attempt to suggest why the variable under study will take some future value.
This limitation of the time series approach is taken care by the application of a causal
method. The causal method tries to identify factors which influence the variable is some way
or cause it to vary in some predictable manner. The two causal methods, regression analysis
and correlation analysis, have already been discussed previously.
A few time series methods such as freehand curves and moving averages simply describe
the given data values, while other methods such as semi-average and least squares help to
identify a trend equation to describe the given data values.

5.1 Freehand Method

A freehand curve drawn smoothly through the data values is often an easy and, perhaps,
adequate representation of the data. The forecast can be obtained simply by extending the
trend line. A trend line fitted by the freehand method should conform to the following
conditions:
(i) The trend line should be smooth- a straight line or mix of long gradual curves.
(ii) The sum of the vertical deviations of the observations above the trend line should equal
the sum of the vertical deviations of the observations below the trend line.
(iii) The sum of squares of the vertical deviations of the observations from the trend line
should be as small as possible.
(iv)The trend line should bisect the cycles so that area above the trend line should be equal to
the area below the trend line, not only for the entire series but as much as possible for each
full cycle7.
Limitations of freehand method
(i) This method is highly subjective because the trend line depends on personal judgement
and therefore what happens to be a good-fit for one individual may not be so for another.
(ii) The trend line drawn cannot have much value if it is used as a basis for predictions.

7 Supra note 8

12

(iii) It is very time-consuming to construct a freehand trend if a careful and conscientious job
is to be done8.

5.2 Method of Averages

The objective of smoothing methods into smoothen out the random variations due to irregular
components of the time series and thereby provide us with an overall impression of the
pattern of movement in the data over time. In this section, we shall discuss three smoothing
methods.
(i) Moving averages
(ii) Weighted moving averages
(iii) Semi-averages
The data requirements for the techniques to be discussed in this section are minimal and these
techniques are easy to use and understand.

5.2.1 Moving Averages

If we are observing the movement of some variable values over a period of time and trying to
project this movement into the future, then it is essential to smooth out first the irregular
pattern in the historical values of the variable, and later use this as the basis for a future
projection. This can be done by calculating a series of moving averages. This method is a
subjective method and depends on the length of the period chosen for calculating moving
averages. To remove the effect of cyclical variations, the period chosen should be an integer
value that corresponds to or is a multiple of the estimated average length of a cycle in the
series.
The moving averages which serve as an estimate of the next periods value of a variable
given a period of length n is expressed as:
Moving average, Mat+1 = {Dt Dt-1 Dt-2 . .. Dt-n+1}/ n
where t = current time period
D = actual data which is exchanged each period
n = length of time period
8 P.J. Diggle, Time Series: A Bio-statistical Introduction, Oxford University Press (1990).

13

In this method, the term moving is used because it is obtained by summing and averaging
the values from a given number of periods, each time deleting the oldest value and adding a
new value.
The limitation of this method is that it is highly subjective and dependent on the length of
period chosen for constructing the averages. Moving averages have the following three
limitations:
(i) As the size of n (the number of periods averaged) increases, it smoothens the variations
better, but it also makes the method less sensitive to real changes in the data.
(ii) Moving averages cannot pick-up trends very well. Since these are averages, it will always
stay within past levels and will not predict a change to either a higher or lower level.
(iii) Moving average requires extensive records of past data9.
Example: Using three-yearly moving averages, determine the trend and short-term-error.
Year

Production (in 000 Year

Production in (000

1987
1988
1989
1990
1991

tonnes)
21
22
23
25
24

tonnes)
22
25
26
27
26

1992
1993
1994
1995
1996

Solution: The moving average calculation for the first 3 years is:
Moving average (year 1-3) = 21+22+23 / 3 = 22
Similarly, the moving average calculation for the next 3 years is: 22 + 23 + 25
Moving average (year 2-4) = 22+23+25/3 = 22.33
A complete summary of 3-year moving average calculations is given in Table 7.1
Table: Calculation of Trend and Short-term Fluctuations
Year (Y)

Production

3- Year Moving 3-yearly Moving Forecast

Total

Error

Average (Trend (y-y1)

Values y1)

1987

21

9 Supra note 5

14

1988

22

66

22.00

1989

23

70

23.33

-0.33

1990

25

72

24.00

1.00

1991

24

71

23.67

0.33

1992

22

71

23.67

-1.67

1993

25

73

24.33

0.67

1994

26

78

26.00

1995

27

79

26.33

0.67

1996

26

5.2.1.1. Odd and Even Number of Years

When the chosen period of length n is an odd number, the moving average at year i is
centered on i, the middle year in the consecutive sequence of n yearly values used to compute
i. For instance with n =5, MA3(5) is centered on the third year, MA4(5) is centered on the
fourth year, and MA9(5) is centered on the ninth year. No moving average can be obtained
for the first (n-1)/2 years or the last (n- 1/2) year of the series. Thus for a 5-year moving
average, we cannot make computations for the just two years or the last two years of the
series. When the chosen period of length n is an even numbers, equal parts can easily be
formed and an average of each part is obtained. For example, if n = 4, then the first moving
average M3 (placed at period 3) is an average of the first four data values, and the second
moving average M4 (placed at period 4) is the average of data values 2 through 5). The
average of M3 and M4 is placed at period 3 because it is an average of data values for period
1 through 510.
Example: Assume a four-yearly cycle and calculate the trend by the method of moving
average from the following data relating to the production of tea in India.
Year

Production

1987
1988

lbs)
464
515

(million Year

Production

1992
1993

million lbs)
540
557

(in

10 Palm, F. C., GARCH Models of Volatility: In Handbook of Statistics, Vol. 14., Ed, Amsterdam (1996) ,
209240.

15

1989
1990
1991

518
467
502

1994
1995
1996

571
586
612

Solution:
The first 4-year moving average is: MA3(4) = 464 + 515 + 518+ 467/4
= 1964/4
= 491.00
This moving average is centered on the middle value, that is, the third year of the series.
Similarly,
MA4(4)= 515+518+467+502/4
= 2002/4
= 500.50
This moving average is centered on the fourth year of the series.
Table: Presents the data along with the computations of 4-year moving averages.
Table: Calculation of Trend and Short-term Fluctuations
Year

Production (mm 4-yearly moving 4-yearly moving 4-yearly moving

lbs)

totals
1964
2002
2027
2066
2170
2254

average

Average

491.00
500.50
506.75
516.50
542.50
563.50

Centered
495.75
503.62
511.62
529.60
553.00
572.00

1987
1988
1989
1990
1991
1992
1993
1994

464
515
518
467
502
540
557
571

1995

586

581.50

1996

612

16

5.2.2. Weighted Moving Averages

In moving averages, each observation is given equal importance (weight). However, different
values may be assigned to calculate a weighted average of the most recent n values. Choice
of weights is somewhat arbitrary because there is no set formula to determine them. In most
cases, the most recent observation receives the most weightage, and the weight decreases for
older data values.
A weighted moving average may be expressed mathematically as
Weighted moving average = (Weight for period n) (Data value in period n)/ Weights
Example11: A vacuum cleaner sale for 12 months is given below. The owner of the
supermarket decides to forecast sales by weighting the past three months as follows:
Weight Applied Month

Month

Last month

Two months ago

Three months ago

: 1

9 10 11 12

Actual sales (in units) : 10 12 13 16 19 23 26 30 28 18 16 14

Solution: The results of 3-month weighted average are shown:
Forecast for the Current month = 3 Sales last month + 2 Sales two months ago +
1 Sales three months ago/ 6
Table: Weighted Moving Average
Month
1
2
3
4
5
6
7

Actual Sales
10
12
13
16
19
23
26

Three- month Weighted Moving Average

1/6 [3*13) + (2*12) + 1*10] = 121/6
1/6 [3*16) + (2*13) + 1*12] = 141/3
1/6 [3*19) + (2*16) + 1*13] = 17
1/6 [3*23) + (2*19) + 1*16] = 201/2

11 Surinder Kundu, An Introduction to Business Statistics, Universal Publishing House (2009)

17

30

1/6 [3*26) + (2*23) + 1*19] = 235/6

28

1/6 [3*30) + (2*26) + 1*23] = 271/2

10

18

1/6 [3*28) + (2*30) + 1*26] = 289/3

11

16

1/6 [3*18) + (2*28) + 1*30] = 231/3

12

14

1/6 [3*16) + (2*18) + 1*28] = 182/3

5.2.3. Semi-Average Method

The semi-average method permits us to estimate the slope and intercept of the trend the quite
easily if a linear function will adequately described the data. The procedure is simply to
divide the data into two parts and compute their respective arithmetic means. These two
points are plotted corresponding to their midpoint of the class interval covered by the
respective part and then these points are joined by a straight line, which is the required trend
line. The arithmetic mean of the first part is the intercept value, and the slope is determined
by the ratio of the difference in the arithmetic mean of the number of years between them,
that is, the change per unit time. The resultant is a time series of the form: y = a + bx . The y
is the calculated trend value and a and b are the intercept and slope values respectively. The
equation should always be stated completely with reference to the year where x =0 and a
description of the units of x and y. The semi-average method of developing a trend equation
is relatively easy to commute and may be satisfactory if the trend is linear. If the data deviate
much from linearity, the forecast will be biased and less reliable12.
Example: Calculate a trend line to the following data by the method of semi-average and
forecast the sales for the year 2002.
Year

Sales

of

1993
1994
1995
1996

(thousand units)
102
105
114
110

Firm Year
1997
1998
1999

Sales

of

Firm

(thousand units
108
116
112

12 R.P. Hooda, Statistics for Business and Economics, Universal Publishing House, (2012)

18

Solution: Since numbers of years are odd in number, therefore divide the data into equal
parts (A and B) of 3 years ignoring the middle year (1996). The average of part A and B is
y1A= 102+105+114/3 units
= 321/3 units
= 107 units
y1B = 108+116+112/3 units
= 336/2 units
= 112 units
Part A is centered upon 1994 and part B on 1998. Plot points 107 and 112 against their middle
years, 1994 and 1998.
To calculate the time series y1= a + bx, we need
Slope b = y/ x
= Change in sales/ Change in year
= 112-107/1998-1994
= 5/4
= 1.25
Intercept = a = 107 units at 1994
Thus, the trend line is:

y1 = 107 + 1.25x

Since 2002 is 8 year distant from the origin (1994), therefore we have
y1 = 107 + 1.25(8) = 117

19

20

6. CONCLUSION
Time Series is an important statistical technique to measure the various trends like the
cyclical variations, trends of time, and seasonal variations. The Moving Averages method
successfully breaks down time periods into components and then account for the factors of
different variations like time and seasonal variations. Time series data have a natural temporal
ordering. The moving averages method, weighted averages method and the semi average
method though effective just describe the values over definite and integer like periods of
time. The moving averages method cannot work when the time period and the carious
variations are non-integer or in fractions or decimals. IN the weighted averages method
random values are attributed to the variations and time periods so as to facilitate ease in
calculation. Such weightage usually changes according to how old the value is with the oldest
values getting the least weightage. In the semi-average model the plotting of the calculated
trend values is the most important function of such model. Here, the values are divided into
two different components and after calculating the arithmetic mean is plotted on the graph so
that future statistical forecasting can be done13.
This makes time series analysis distinct from cross-sectional studies, in which there
is no natural ordering of the observations (e.g. explaining people's wages by reference to their
respective education levels, where the individuals' data could be entered in any order). Time
series analysis is also distinct from spatial data analysis where the observations typically
relate to geographical locations (e.g. accounting for house prices by the location as well as
the intrinsic characteristics of the houses).

13 Gershenfeld .N, The Nature of Mathematical Modeling. New York: Cambridge University Press.
pp. 205208 (1991)

21

I.
II.
III.
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