Irregular variation in time series analysis, Financial Management

Irregular Variation

As the name suggests, the movement of the variable is random in nature without consistency and therefore, highly unpredictable. Since this type of irregularity exists for very short durations, the period under consideration will be of days, weeks and at the most of months. An appropriate example would be, a sudden spurt in the price of the share of a company rumors of a takeover. The irregular variation is shown in the figure below. Irregular variation is so inconsistent, that there is not a suitable mathematical model which would explain the phenomena under consideration.

Figure

520_irregular variation.png

Till now we have expressed the variations in terms of only one variation throughout. In the real world, this is seldom true and more often we find time series exhibiting more than one type of variation. In this part, we look at an example and examine it for three components of variation leaving out irregular variation.

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