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Subtopic 1 - Overview of Time Series

This document provides an overview of time series analysis and forecasting. It defines key terms, discusses different types of time series data and patterns (trends, seasonality, cycles), and introduces various software and methods used for time series analysis and forecasting (exponential smoothing, moving average, Tableau, Excel, SAP Analytics, SAS 9.4). Measures for evaluating forecast accuracy like forecast error, mean absolute error, and mean squared error are also covered. The document explains the differences between univariate and multivariate time series models.

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Kim Vincere
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49 views30 pages

Subtopic 1 - Overview of Time Series

This document provides an overview of time series analysis and forecasting. It defines key terms, discusses different types of time series data and patterns (trends, seasonality, cycles), and introduces various software and methods used for time series analysis and forecasting (exponential smoothing, moving average, Tableau, Excel, SAP Analytics, SAS 9.4). Measures for evaluating forecast accuracy like forecast error, mean absolute error, and mean squared error are also covered. The document explains the differences between univariate and multivariate time series models.

Uploaded by

Kim Vincere
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TIME SERIES AND FORECASTING

Module 4
SUBTOPIC 1
OVERVIEW OF TIME
SERIES ANALYSIS
Upon the completion of this module, the students are
expected to:
• Further understand the concept of Time Series Analysis
• Define terms related to forecasting
• Identify various software systems used in forecasting
• Determine the requirements for doing time series analysis
• Time series data is a sequence of observations collected
from a process with equally spaced periods of time.
• It establish relation between “cause” and “effect”
• One variable is “Time” which is considered as the
independent variable and the second is “Data” also known
as the dependent variable.
Time series data is
expected to have two
variables: time and data
1. Daily data on sales
2. Monthly inventory
3. Daily customers
4. Monthly interest rates, cost
5. Monthly unemployment rates
6. Weekly measures of money supply
7. Daily closing prices of stock indexes, and soon.
Day No. of Packets Milk
Number of milks sold increases
sold
every Weekend
Monday 90
120
Tuesday 88 100

Wednesday 85 80

Thursday 75 60

40
Friday 72
20
Saturday 90 0
Monday Tuesday Wednesday Thursday Friday Saturday Sunday
Sunday 102
Through Time Series Analysis, businessmen can predict about
the changes in economy.
Furthermore, it could also help in determining the following:

• Stock Market analysis


• Risk analysis and evaluation
• Census analysis
• Budgetary analysis
• Inventory studies
• Sales Forecasting
The increase or decrease in the movements of a time series
is called secular trend.

A time series data may show upward trend or downward


trend for a period of years and this may be due to factors like:
• Increase of population
• Change in technological progress
• Large scale shift in consumers demands
It is a short-term fluctuation in a time series which occur
periodically in a year.

Examples:
• More woolen clothes are sold in winter than in the season
of summer
• Each year more ice creams are sold in summer and very
little in Winter season
These are recurrent upward or downward movements in a
time series but the period of cycle is greater than a year.
These are fluctuations in the time series that are short in
duration, erratic in nature and follow no regularity in the
occurrence pattern.
Exponential Smoothing Moving Average
Tableau Excel
SAP Analytics
SAS 9.4
Computing Forecasts and Measures of Forecast Accuracy using
the most recent Value as the Forecast for the next Period
Measures to determine how well a particular forecasting
method is able to reproduce the time series data that are
already available
Forecast Error: Difference between the actual and
the forecasted values for period t.
• 𝑒𝑡 = 𝑦𝑡 − 𝑦ො𝑡
Mean Forecast Error: Mean or average of the
forecast errors.
σ𝑛
𝑡 = 𝑘 + 1 𝑒𝑡
• MFE =
𝑛−𝑘
• Measures to determine how well a particular forecasting
method is able to reproduce the time series data that are
already available.
Mean Absolute Error (MAE): Measure of forecast accuracy that
avoids the problem of positive and negative forecast errors offsetting
one another.
σ𝑛
𝑡 = 𝑘 + 1 𝑒𝑡
• MAE =
𝑛−𝑘
Mean Squared Error (MSE): measure that avoids the problem of
positive and negative errors offsetting each other is obtained by
computing the average of the squared forecast errors.
σ𝑛 2
𝑡 = 𝑘 + 1 𝑒𝑡
• MFE =
𝑛−𝑘
Univariate time series models are models used when the
dependent variable is a single time series.
Multivariate time series models are used when there are
multiple dependent variables. In addition to depending on
their own past values, each series may depend on past and
present values of the other series.

Modeling U.S. gross domestic product, inflation, and


unemployment together as endogenous variables is an
example of a multivariate time series model.
Why use time series analysis?
• Reliability – time series uses collected historical data over
a period of time.
• Seasonal patterns – since TSA deals with periodic data, it
is easy to predict seasonal pattern.
• Estimation of trends – the graph of TSA makes it easy to
visualize the increase or decrease in sales, production,
etc.
• Growth – through depicting patterns, TSA helps in
measuring the financial growth.
• Larose, D., Larose, C., 2015. Data Mining and Predictive
Analytics
• SAS. Time Series Analysis
• Erica, 2019. Introduction to the Fundamentals of Time
Series Data and Analysis.
https://www.aptech.com/blog/introduction-to-the-
fundamentals-of-time-series-data-and-analysis/s

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