Utility of Time Series Analysis

The analysis of Time Series is of great significance not only to the economist and businessman but also to the scientist, geologist, biologist, research worker, etc., for the reasons given below:

(1)    It helps in understanding past behaviors.

By observing data over a period of time one can easily understanding what changes have taken place in the past, Such analysis will be extremely helpful in producing future behavior.

(2)    It helps in planning future operations.

Plans for the future cannot be made without forecasting events and relationship they will have. Statistical techniques have been evolved which enable time series to be analyzed in such a way that the influences which have determined the form of that series to be analyzed in such a way that the influences which have determined the form of that series may be ascertained. If the regularity of occurrence of any feature over a sufficient long period could be clearly established then, within limits, prediction of probable future variations would become possible.

(3)    It helps in evaluating current accomplishments.

The performance can be compared with the expected performance and the cause of variation analyzed. For example, if expected sale for 1995 was 10,000 refrigerators and the actual sale was only 9,000, one can investigate the cause for the shortfall in achievement. Time series analysis will enable us to apply the scientific procedure of “holding other things constant” as we examine one variable at a time. For example, if we know how much the effect of seasonality on business is we may devise ways and means of ironing out the seasonal influence or decreasing it by producing commodities with complementary seasons.

(4)    It facilitates comparison.

Different time series are often compared and important conclusions drawn there from.
However, one should not be led to believe that by time series analysis one can foretell with 100percnet accuracy the course of future events. After all, statisticians are not foretellers. This could be possible only if the influence of the various forces which affect these series such as climate, customs and traditions, growth and decline factors and the complex forces which proclimate, customs and traditions, growth and decline factors and the complex forces which produce business cycles would have been regular in their operation. However, the facts of life reveal that this type of regularity does not exist. But this then does not mean that time series analysis is of value. When such analysis is couples with a careful examination of current business indicators once can undoubtedly improve substantially upon guest mates (i.e., estimates based upon pure guesswork) in forecasting future business conditions.

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