Seasonal variation in time series analysis, Financial Management


Seasonal Variation

Under this variation, we observe that the variable under consideration shows a similar pattern during certain months of the successive years. An example of seasonal variation would be an increase in water borne diseases during rainy season. That is, this phenomenon seems to be repeating itself every year in a regular fashion. Usually, the time period over which this variation is considered can consist of days, weeks, months and at the most one year. The seasonal variation is depicted in the figure below. We can observe the uniformity in the pattern during every second quarter of the year.

88_seasonal variation.png

The study of trends has a positive impact on the overall analysis and facilitate the process of drawing more meaningful conclusions. The analysis is useful because

  1. It helps us to establish the pattern of changes during the same period in different years and examine the reason for the same.

  2. It helps us to project the past patterns into future. The projections from the seasonal variations are helpful in formulating short-term objectives of a firm. This is similar to the projection of the secular trend into the future for achieving the long-term goals.

  3. It helps the identification of the seasonal trend in a time series to isolate it and study the impact of other components of variation in the series.

Posted Date: 9/17/2012 3:37:36 AM | Location : United States

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