Time Series Analysis MBA 1st Year Semester Long Question Answer Study Notes

Time Series Analysis MBA 1st Year Semester Long Question Answer Study Notes:- In this Post, you will see about Time Series Analysis MBA 1st Year Semester Long Question Answer Study Notes and Study Material Notes Unit Wise Syllabus Chapter Wise Notes Time Series Analysis, Concept, Additive, And multiplicative models, Components of time series, Trends Analysis, Least-squares Method Linear and nonlinear equations, applications In Business Decision-Making. Index Number Meaning, Types of Index Numbers, Uses Of Index Numbers, Construction Of Price, quantity And Volume Indices Fixed Base and Chain Base Methods.

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MBA Topic Chapter Semester Wise Sample Model Practice Question Answer Papers

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Q.1. Briefly explain the components of time series.

More Questions-
What is time series? Explain the various components of time series. Also, discuss its importance,
Discuss briefly the components of a time series.
Differentiate between seasonal variations and cyclical fluctuations.
Explain the various components of a time series.

Ans. Time Series: Refer to Section-A, Q.
Secular Variations or Trend (T)

The general tendency of time series data to increase or decrease or stagnate during a long period of time is called the secular trend or simply trend.

The trend thus refers to the general direction and the movements of time series considering a fairly long period of time, most business and economic series are influenced by some secular forces of change in which the underlying tendency is one from growth or decline, e.g. in series concerning population national income, agricultural production, currency in circulation, bank deposits, etc. and upward national income, agricultural production, currency in circulation bank deposits, etc. and the upward tendency is usually observed while a downward tendency is noticed in time series relating the birth and death rates especially in deaths by epidemics, tuberculosis, etc.

Cyclical Variations (C)

As the economy expands during a period of boom, we would expect to find out such data as sales, output, or consumption.

output or consumer expenditure also show a rising trend and during a period of slump, we would expect them to show a downward trend. Thus, a wavelike motion may be observed in the pattern of our data. They are prosperity (boom), recession, depression, and recovery, as shown in the given figure.

The study of cyclical variation is helpful to businessmen and economists for framing suitable policies and stabilizing the level of business activities.

Purposes: The purpose of studying the cyclical variation is: fluctuations. Good policies can be formulated at stabilizing the level of business activity. 

• Businessmen can take timely steps in maintaining business during booms and depressions. 
• A careful study of cyclical variations facilitates a
• businessman to face the recession period and make them ready to reap the benefits during booms.

Seasonal Variations (S) 

Seasonal variations refer to rhythmic forces of change inherent in most time series showing a regular or a periodic pattern of movement over a span of less than a year and has the same or almost the same pattern year. after year.

‘A recurrent pattern of change within the period that results from the operation of forces connected with climate or custom at different times of the period.’

Reasons: The seasonal variation may occur due to: 

1. Climate and Natural Forces: The result of natural forces like climate is causing seasonal variation. Umbrellas are sold more in the rainy season. In the winter season, the sale of woolen clothes will increase. In the hot season, the sales of ice, ice cream, fruit, salad, etc. will increase. Thus, climate and weather play an important role in the seasonal movement. Agricultural production depends upon the monsoon. 

2. Customs and Habits: Man-made conventions are the customs, habits, fashion, etc. There is the custom of wearing new clothes, preparing sweets, and buying crackers for Deepawali, Onam, Christmas, etc. At that time, there is more demand for clothes, sweets, and crackers. It will happen every year. In marriage season, the price of gold will increase. 

Purposes: A study of the seasonal variation of a time series is useful for the following purposes:

1. To analyze the seasonal patterns in a short-period time series. 
2. Once the seasonal factor is known, it can be used for separating cyclical and irregular forces from the residual forces of changes. 
3. The seasonal factor can be used for adjustment in the value projected on the basis of the trend. Short-term forecasts are always affected by seasonal factors. 
4. The observed value can be appraised in terms of seasonal factors and adjusted so as to get a correct idea of the trend, if any, in an economic phenomenon. The study of seasonal variations is, therefore, necessary for proper appraisal of business facts influenced by a seasonal variation. 
5. The seasonal factor can also be used for the pricing of articles and services so as to level up the seasonal demand.  A study of the seasonal pattern is extremely useful in planning future operations and in the formulation of policy decisions regarding the purchase, production, inventory control, personnel requirement, selling and advertising program, etc.

Irregular Variations (1) or Erratic

Irregular variations are the effect of random factors. These are generally mixed up with the season and cyclical variations and are caused by irregular and accidental factors like floods, famines, w: strikes, lockouts, etc. There is no regular period or time of their occurrence and that is why they called random or chance fluctuations. Sometimes these factors are very effective and may even give rise to cyclical fluctuations. However, since these are not regular factors, no advance preparation can be done to meet their consequences. Their effects are also unpredictable and irregular.

Q.2. Explain the various methods for isolating trends.

Ans. Methods for Isolating Trends: The various methods for isolating trends are as follows: 

1. Free-hand Method (or Graphical Method)

This is the easiest, simplest, and most flexible method of estimating secular trends. The procedure of obtaining a straight-line trend by this method is given below:     

1. Plot the time series on a graph. 
2. Examine carefully the direction of the trend based on the plotted information (dots). 
3. Draw a straight line that will best fit the data according to personal judgment. The line now shows the direction of the trend. 

To get a proper trend line, we must note some points while fitting a trend line by the free-hand method:

1. The curve should be smooth. 
2. Approximately there must be an equal number of points above and below the curve. 
3. The total deviations of the data above the trend line must be the same as the vertical deviations below the line. 
4. The sum of the squares of the vertical deviations from the trend should be as small as possible

Merits: The merits of the free-hand method are as follows: 

1. Free-hand method of estimating trends is the simplest method. Time and labor are saved and for this reason, they are widely used in business.
2. It is more flexible than rigid mathematical function, hence fitting the curve more closely to the data.