Which of the following is NOT a valid time series decomposition? trend x seasonal + irregular trend x seasonal x irregular trend + irregular seasonal + calendar effects
Question
Which of the following is NOT a valid time series decomposition? trend x seasonal + irregular trend x seasonal x irregular trend + irregular seasonal + calendar effects
Solution
The option "seasonal + calendar effects" is NOT a valid time series decomposition.
Time series decomposition typically involves three components: trend, seasonality, and irregularity (or randomness).
- Trend represents the overall pattern of the series, often over a long period of time.
- Seasonality represents the repeating short-term cycle in the series.
- Irregularity represents the random variation in the series.
The first three options involve these three components in some form. However, the last option "seasonal + calendar effects" does not include all three components. Calendar effects are not a standard component of time series decomposition. They could potentially be part of the irregular component, but they are not a separate, standard component. Therefore, this option is not a valid time series decomposition.
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