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Lesson 1: What Is A Time Series: Umberto Triacca

This document defines and describes time series data. It explains that a time series is a set of observations on a variable collected over time. It discusses discrete and continuous time series, and focuses on discrete, regularly sampled time series. It also describes how to visualize time series data through time series plots or graphs, and the trends, patterns, and features that can be observed in these graphs, such as trends, seasonality, cycles, outliers and discontinuities. The goal of time series analysis is described as forecasting future values by developing a model of the data generating process.

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74 views

Lesson 1: What Is A Time Series: Umberto Triacca

This document defines and describes time series data. It explains that a time series is a set of observations on a variable collected over time. It discusses discrete and continuous time series, and focuses on discrete, regularly sampled time series. It also describes how to visualize time series data through time series plots or graphs, and the trends, patterns, and features that can be observed in these graphs, such as trends, seasonality, cycles, outliers and discontinuities. The goal of time series analysis is described as forecasting future values by developing a model of the data generating process.

Uploaded by

NoureddineLahouel
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Lesson 1: What is a time series

Umberto Triacca

Dipartimento di Ingegneria e Scienze dell’Informazione e Matematica


Università dell’Aquila,
umberto.triacca@univaq.it

Umberto Triacca Lesson 1: What is a time series


Time series

What is a time series?

Umberto Triacca Lesson 1: What is a time series


Time series

A time series is a set of observations on a


given variable x collected over the time.

Umberto Triacca Lesson 1: What is a time series


Time series

If we denote with T the set of time points at which observations


are made, with xt the observation made at time t, then the time
series is represented by the set

{xt ; t ∈ T }

Umberto Triacca Lesson 1: What is a time series


Time series

No restriction is placed on the nature of T . However, two


important cases are when
T is a finite set of time points;
T is a closed time interval.

Umberto Triacca Lesson 1: What is a time series


Time series

Discrete time series

Continuous time series

Umberto Triacca Lesson 1: What is a time series


Time series

Discrete time series. A discrete time series is one in which the


set of times at which observations are made is a finite set.

Continuous time series. A continuous time series is obtained


when the observations are made continuously over some
closed time interval.

Umberto Triacca Lesson 1: What is a time series


Time series

Consider a discrete time series. Let the times at which


observations are made be

t1 , t2 , ..., tT

satisfying
t1 < t2 < ... < tT .
If the time points are equally spaced (i.e. ti+1 − ti = ∆ for all
i = 1, ..., T − 1, where ∆ > 0 is a constant), we call the time
series regularly sampled. Otherwise, the sequence of observations
is called irregularly sampled time series.

Umberto Triacca Lesson 1: What is a time series


Time series

When we consider a discrete regularly sampled time series, the


observation dates (periods) are denoted by integers t = 1, 2, ..., T

Thus a discrete regularly sampled time series on one variable x


with T observations, will be represented by the sequence

{x1 , x2 , ..., xT }

Umberto Triacca Lesson 1: What is a time series


Time series

We will consider only discrete regularly sampled time series

Umberto Triacca Lesson 1: What is a time series


Time series

An important feature of time series data is the frequency at which


the data are collected:

the sampling frequency

Series can be recorded annually, quarterly, monthly, weekly, daily,


..., every minutes.

Umberto Triacca Lesson 1: What is a time series


Time series

In economics, the most common frequencies are:


annual,
quarterly,
monthly,
daily

Umberto Triacca Lesson 1: What is a time series


Time series

Thus we can have annual, quarterly, monthly, weekly, daily time


series.

the GDP in a country in successive years


the money supply in a country in successive quarters
the number of international airline passengers in successive
months
the returns of IBM stock on successive days.

Umberto Triacca Lesson 1: What is a time series


The time series graph

A important tool in time series analysis is the time series graph.

A time series graph is a scatter plot with the observation


values on the y -axis and the corresponding dates on the
x-axis.

Umberto Triacca Lesson 1: What is a time series


The time series graph

Consider, for example, the monthly time series of the international


airline passengers Jan 49 -â Dec 60.

Figure : International airline passengers: monthly totals in thousands.


Jan 49 - Dec 60

Umberto Triacca Lesson 1: What is a time series


The time series graph
However, it is often convenient to join up consecutive points in
time as in the following figure.

Figure : International airline passengers: monthly totals in thousands.


Jan 49 - Dec 60

This graph is called a time series plot.


Umberto Triacca Lesson 1: What is a time series
Time series

Figure : 1

Umberto Triacca Lesson 1: What is a time series


Time series

Figure : 2

Umberto Triacca Lesson 1: What is a time series


Time series

Figure : 3

Umberto Triacca Lesson 1: What is a time series


Time series

Figure : 4

Umberto Triacca Lesson 1: What is a time series


The time series graph

By plotting data as a function of time, we can gain insight into


several data features. These features include:

1 Trend: a tendency, a long term change in the mean level;


2 Seasonality: an intra-year fluctuation that is more or less
stable year after year with respect to timing, direction and
magnitude;
3 Cycle: an inter-year periodic fluctuation around the trend,
revealing a succession of phases of expansion and contraction;
4 Outliers: values that do not appear to be consistent with the
rest of the data;
5 Turning points: different trends within a series;
6 Discontinuities: an unexpected shift, a sudden change of level.

Umberto Triacca Lesson 1: What is a time series


The time series graph

An increasing trend is apparent in the number of divorces in Italy

Figure : Annual number of divorces in Italy from 1995 to 2007

Umberto Triacca Lesson 1: What is a time series


The time series graph

A clear seasonal component is contained in the series presented in


the following Figure.

Figure : Industrial production - total industry (excluding construction) in


Italy, Index (2005 = 100) from January 1990 to February 2010.

Umberto Triacca Lesson 1: What is a time series


A cyclic component is present in the following time series.

Figure : Sunspots Number. July 1969 to September 2007.

Umberto Triacca Lesson 1: What is a time series


The time series graph

Figure : Daily returns of the Dow Jones Industrials index from 80/01/02
to 89/12/29

Direct inspection of figure suggests the series of daily returns of


the Dow Jones Industrials index contains some outliers. In
particular, the crash of October 19, 1987.

Umberto Triacca Lesson 1: What is a time series


The time series graph

A turning point is present in the unemployment rate in Italy.

Figure : Quarterly unemployment rate in Italy 2000.1-2009.4

Umberto Triacca Lesson 1: What is a time series


The time series graph

The annual U.S. price index for gasoline is shown in this Figure. It
appears from the graph the presence of a structural break in the
data.

Figure : Annual U.S. price index for gasoline from 1960 to 1995

Umberto Triacca Lesson 1: What is a time series


The time series graph

In summary, a time series plot is a valuable tool used in order to


identify patterns in the data.
bigskip

A good picture is better than 1000 words

Umberto Triacca Lesson 1: What is a time series


Time series

A question:

Why we want to study a time series?

Umberto Triacca Lesson 1: What is a time series


Time series

The main objective for analyse a time series is to forecast its


future values

Umberto Triacca Lesson 1: What is a time series


Time series

In order to reach this goal we need of a model of the ”mechanism”


that has generated the series.
A model of the so-called Data Generator Process (DGP).

Umberto Triacca Lesson 1: What is a time series

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