Time Series Analysis
Time Series Analysis
Time Series Analysis
an introduction
A time series is defined as a collection of observations made sequentially in time. This means that there must be equal intervals of time in between observations.
Deterministic vs. Stochastic Deterministic time series - This data can be predicted exactly. Stochastic time series - Data are only partly determined by past values and future values have to be described with a probability distribution. This is the case for most, if not all, natural time series. So many factors are involved in a natural system that we can not possibly correctly apply all of them.
Autocorrelation
A series of data may have observations that are not independent of one another. Example: A population density on day 8 depends on what that population density was at on day 7. And likewise, that in turn is dependent on day 6 and so forth. The order of these data has to be taken into account so that we can assess the autocorrelation involved.. To find out if autocorrelation exists: Autocorrelation Coefficients measure correlations between observations a certain distance apart. Based on the ordinary correlation coefficient r, we can see if successive observations are correlated. An autocorrelation coefficient at lag k can be found by:
This is the covariance (xt xt+k)divided by the variance (xt). An rk value of ( 2/ ) denotes a significant difference from zero and signifies an autocorrelation. Also note that as k gets large, rk becomes smaller.
Correlograms
The autocorrelation coefficient rk can then be plotted against the lag (k) to develop a correlogram. This will give us a visual look at a range of correlation coefficients at relevant time lags so that significant values may be seen. The correlogram in Fig.2 shows a short-term correlation being significant at low k and small correlation at longer lags. Remember that an rk value of ( 2/ ) denotes a significant difference (a = 0.05) from zero and signifies an autocorrelation. Some procedures may call for a higher a value since this constitues expectation that one out of every twenty obsservations in a truly random data series will be significant.
Figure 2. A time series showing short-term autocorrelation together with its correlogram. Fig. 3 shows an alternating (negative correlation) time series. The coefficient rk alternates as does the raw data (r1 is negative and r2 is positive ..) This series of rk is negative.
Yt = Yt-1 + at The order of the process rarely exceeds one (d < 2 in most situations). The moving average process [ARIMA (0,0,q)] is used for serial correlated data. The process is composed of the current random shock and portions of the q previous shocks. An ARIMA (0,0,1) model is described as: Yt = at - 1at-1 As with the integration process, the MA process rarely exceeds the first order.