Track 12 · Time Series and Forecasting · Lesson 8 of 11
Decomposition
Carry out a classical additive or multiplicative decomposition, interpret seasonal indices and seasonally adjusted values, and recognise the method's limits.
35 minAdvanced7 graded exercisesMembers
“Sales fell 30% in September” is alarming — unless September always runs 30% below August. Decomposition separates what the calendar does every year from the trend and from the genuinely unusual, so that each month's figure can be read against the right baseline.
Classical decomposition estimates the three components of a series in four steps. It assumes the seasonal pattern is the same in every cycle.
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It has 7 graded exercises with feedback, hints and worked solutions. After it you will be able to:
- Carry out the four steps of a classical decomposition
- Normalise and interpret additive and multiplicative seasonal indices
- Compute seasonally adjusted values and compare months fairly
- Recognise the limits: missing ends, fixed seasonality, breaks leaking into the remainder