TIME SERIES One definition of a time series is that of a collection of quantitative observations that are evenly spaced in time

and measured successively. Examples of time series include the continuous monitoring of a persons heart rate, hourly readings of air temperature, daily closing price of a company stock, monthly rainfall data, and yearly sales figures. Time series analysis is generally used when there are 50 or more data points in a series. If the time series exhibits seasonality, there should be 4 to 5 cycles of observations in order to fit a seasonal model to the data.

Goals of time series analysis: 1. Descriptive: Identify patterns in correlated datatrends and seasonal variation 2. Explanation: understanding and modeling the data 3. Forecasting: prediction of short-term trends from previous patterns 4. Intervention analysis: how does a single event change the time series? 5. Quality control: deviations of a specified size indicate a problem

Time series are analyzed in order to understand the underlying structure and function that produce the observations. Understanding the mechanisms of a time series allows a mathematical model to be developed that explains the data in such a way that prediction, monitoring, or control can occur. Examples include prediction/forecasting, which is widely used in economics and business. Monitoring of ambient conditions, or of an input or an output, is common in science and industry. Quality control is used in computer science, communications, and industry.

It is assumed that a time series data set has at least one systematic pattern. The most common patterns are trends and seasonality. Trends are generally linear or quadratic. To find trends, moving averages or regression analysis is often used. Seasonality is a trend that repeats itself systematically over time. A second assumption is that the data exhibits enough of a random process so that it is hard to identify the systematic patterns within the data. Time series analysis techniques often employ some type of filter to the data in order to dampen the error. Other potential patterns have to do with lingering effects of earlier observations or earlier random errors.

There are numerous software programs that will analyze time series, such as SPSS, JMP, and SAS/ETS. For those who want to learn or are comfortable with coding, Matlab, S-PLUS, and R are

other software packages that can perform time series analyses. Excel can be used if linear regression analysis is all that is required (that is, if all you want to find out is the magnitude of the most obvious trend). A word of caution about using multiple regression techniques with time series data: because of the autocorrelation nature of time series, time series violate the assumption of independence of errors. Type I error rates will increase substantially when autocorrelation is present. Also, inherent patterns in the data may dampen or enhance the effect of an intervention; in time series analysis, patterns are accounted for within the analysis.

Observations made over time can be either discrete or continuous. Both types of observations can be equally spaced, unequally spaced, or have missing data. Discrete measurements can be recorded at any time interval, but are most often taken at evenly spaced intervals. Continuous measurements can be spaced randomly in time, such as measuring earthquakes as they occur because an instrument is constantly recording, or can entail constant measurement of a natural phenomenon such as air temperature, or a process such as velocity of an airplane.

Time series are very complex because each observation is somewhat dependent upon the previous observation, and often is influenced

by more than one previous observation. Random error is also influential from one observation to another. These influences are called autocorrelationdependent relationships between successive observations of the same variable. The challenge of time series analysis is to extract the autocorrelation elements of the data, either to understand the trend itself or to model the underlying mechanisms.

Time series reflect the stochastic nature of most measurements over time. Thus, data may be skewed, with mean and variation not constant, non-normally distributed, and not randomly sampled or independent. Another non-normal aspect of time series observations is that they are often not evenly spaced in time due to instrument failure, or simply due to variation in the number of days in a month.

There are two main approaches used to analyze time series (1) in the time domain or (2) in the frequency domain. Many techniques are available to analyze data within each domain. Analysis in the time domain is most often used for stochastic observations. One common technique is the Box-Jenkins ARIMA method, which can be used for univariate (a single data set) or multivariate (comparing two or more data sets) analyses. The ARIMA technique uses moving averages, detrending, and regression methods to detect and remove

autocorrelation in the data. Below, I will demonstrate a BoxJenkins ARIMA time domain analysis of a single data set.

Analysis in the frequency domain is often used for periodic and cyclical observations. Common techniques are spectral analysis, harmonic analysis, and periodogram analysis. A specialized technique is Fast Fourier Transform (FFT). Mathematically, frequency domain techniques use fewer computations than time domain techniques, thus for complex data, analysis in the frequency domain is most common. However, frequency analysis is more difficult to understand, so time domain analysis is generally used outside of the sciences.