CIMA BA1 Syllabus C. Informational Context Of Business - Time series - Components - Notes ^{3 / 10}

A time series

is a series of figures or values recorded over time. 
e.g. monthly sales over the last 3 years.

The data often conforms to a certain pattern over time. 

This pattern can be extrapolated into the future and hence forecasts are possible. 

Time periods may be any measure of time including days, weeks, months and quarters.

A graph of a time series is called a Histogram

A time series has 4 components:

1. Trend

   a trend is the underlying long-term movement over time in values of data recorded

2. Seasonal variations or fluctuations

   are short-term fluctuations in recorded values, due to different circumstances

    e.g. sales of ice creams will tend to be highest in the summer months

3. Cycles or cyclical variations

   are medium-term changes in results caused by circumstances which repeat in cycles

   e.g. booms and slumps in the economy.

4. Residual variantions

   non-recurring, random variations. 

   These may be caused by unforseen circumstances such as a change in government, a war, technological change or a fire. 

   Hence these are non-repetitive and non-predictable variations.

The actual time series is:

• Y = T + S + C + R

  Where:
  Y = the actual time series
  T = the trend series
  S = the seasonal component
  C = the cyclical component
  R = the random component

  In the exam, it is unlikely that you will be expected to carry out any calculation of ‘C’. 

  Therefore, ‘C’ will be ignored.