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Components of The Series

It is customary to classify the fluctuations of a time series into four basic types of variations which, superimposed and acting all in concert, account for changes in the series over a period of time. These four types of patterns, movement, or, as they are often called, components or elements of a time series are:

(1)    Secular Trend,

(2)    Seasonal Variation,

(3)    Cyclical Variation,

(4)    Irregular Variation.

It may be noted that any or all of these components may be present in any particular series. The following graph gives the sale of Cola for the years 1981 to 1995.
Components of The Series

The original data in this graph is represented by curve (a). The general movement persisting over a long period of time represented by the diagonal line (b) drawn through the irregular curves is called secular trend.

Next, if we study the 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 sequences of changes within the span of a year and has about the same pattern year after year, is called a 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 sequences 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 movements.

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