Running Head: Time Series Analysis

Time Series Analysis

University of Phoenix

Professor Dr. Anthony Matias

QRB 501

John Adegoke

Thursday, April 01, 2010

Time series is a very important part of Quantitative reasoning and Statistics. Time series is a collection of recorded over a period of time --- weekly, monthly, quarterly, or yearly (Lind, Marchal & Wathen p. 651). The lesson uses Microsoft Corporation as an example of time series. It measures its sales by the quarter since 1985 and its linear growth. Time series also deals with the use of data to forecast future events. This paper will look at the main components of a time series and then it will examine some of the techniques used in analyzing data.

There are four major components to a time series: the trend, the cyclical variation, the seasonal variation, and the irregular variation. The secular trend of a time series deals with the long term trends of sales, employment, stock prices, and other business.

The secular trend follows various patterns with some moving steadily upwards, while some trends will follow a declining path. Still some trends will stay the same over time.

In the cyclical variation component, a typical business cycle will have a period of prosperity followed by periods of recession, depression, and eventual recovery. Cyclical variation usually consists of sizable fluctuations unfolding over more than one year which are usually above and below the secular trend. During a time of prosperity, the Dow Jones Industrial Average and many other business are above their long-term trend lines. In a period of depression they are below their long-term trend lines.

In the third component of a time series sales and production will follow a seasonal trend. This seasonal trends form a pattern that seems to repeat itself year after year. Most...