Question

Which of the following is not a component of the time series?

• A. Trend component
• B. Cyclical Component
• C. Seasonal Component
• D. Average Component

Hint:

Remember the four main components of a time series: Trend, Cyclical, Seasonal, and Irregular (T, C, S, I). Any option not on this list is likely the answer to a "which is not a component" question.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
A time series is typically decomposed into several components that represent the different sources of variation in the data over time. The question asks to identify which option is not one of these standard components.
Step 2: Detailed Explanation:
The classical components of a time series are:
1. Trend (T): The long-term, general direction of the data (e.g., upward, downward, or stable). It represents the underlying growth or decline in the series over a long period.
2. Cyclical Component (C): Long-term wave-like patterns or fluctuations around the trend. These cycles are longer than a year and are often associated with business or economic cycles.
3. Seasonal Component (S): Short-term, regular patterns of variation that repeat within a year (e.g., quarterly, monthly, or weekly). Examples include higher retail sales in December or increased ice cream sales in summer.
4. Irregular or Random Component (I): The unpredictable, erratic variations in the data that are not accounted for by the other components. These are caused by random, unforeseen events.
Now let's evaluate the given options:
- (A) Trend component: This is a standard component.
- (B) Cyclical Component: This is a standard component.
- (C) Seasonal Component: This is a standard component.
- (D) Average Component: This is not a standard component of time series decomposition. The average (or mean) is a statistical measure of the entire series' central tendency, but it is not considered one of the dynamic components that describe the variation over time.
Step 3: Final Answer:
"Average Component" is not a standard component of a time series.