Time series Analysis

A time series is a series of data points indexed (or listed or graphed) in time order. Most commonly, a time
series is a sequence taken at successive equally spaced points in time. Thus it is a sequence of discrete-
time data. Examples of time series are heights of ocean tides, counts of sunspots, and the daily closing value of
the Dow Jones Industrial Average.

Time series analysis comprises methods for analyzing time series data in order to extract meaningful statistics
and other characteristics of the data. 

In this project we are using daily data of price to earning ratio of nifty fifty

The data set

MODELS

Models for time series data can have many forms and represent different stochastic processes. When modeling
variations in the level of a process, three broad classes of practical importance are the autoregressive (AR)
models, the integrated (I) models, and the moving average (MA) models. These three classes depend linearly on
previous data points.[29] Combinations of these ideas produce autoregressive moving average (ARMA)
and autoregressive integrated moving average (ARIMA) models

Here we have used arima models to analyse our series (reason will be discussed below)

Traditional methods of time series analysis are concerned with decomposing of a series into

a trend, a seasonal variation and other irregular fluctuations. Although this approach is not always the best but
still useful (Kendall and Stuart, 1996).

The components, by which time series is composed of, are called component of time series data. There are four
basic Component of time series data described below.

Different Sources of Variation are:

Seasonal effect (Seasonal Variation or Seasonal Fluctuations)

Many of the time series data exhibits a seasonal variation which is annual period, such as sales and
temperature readings.  This type of variation is easy to understand and can be easily measured or removed from
the data to give de-seasonalized data.Seasonal Fluctuations describes any regular variation  (fluctuation) with a
period of less than one year.The changes which repeat themselves within a fixed period, are also
called seasonal variations .Seasonal variations are caused by climate, social customs, religious activities etc.

Other Cyclic Changes (Cyclical Variation or Cyclic Fluctuations)

Time series exhibits Cyclical Variations at a fixed period due to some other physical cause, such as daily
variation in temperature. Cyclical variation is a non-seasonal component which varies in recognizable cycle.
sometime series exhibits oscillation which do not have a fixed period but are predictable to some
extent.The cyclical variation are periodic in nature and repeat themselves like business cycle, which has four
phases (i) Peak (ii) Recession (iii) Trough/Depression (iv) Expansion.

Trend (Secular Trend or Long Term Variation)

It is a longer term change. Here we take into account the number of observations available and make a
subjective assessment of what is long term. These movements are systematic in nature where the movements
are broad, steady, showing slow rise or fall in the same direction. The trend may be linear or non-linear
(curvilinear. Change in averages with time is evidence of a trend in the given series, though there are more
formal tests for detecting  trend in time series.

For analyzing the trend of the data the moving average method is usually preferred. 
The moving average of a period (extent) m is a series of successive averages
of m terms at a time. The data set used for calculating the average starts with
first, second, third and etc. at a time and m data taken at a time.

To determine the period (extent for moving average we have used periodogram
analysis approach , to be discussed below)

The main problem in this method is it cannot be used for forecasting, also some
values are lost in starting and ending

Other Irregular Variation (Irregular Fluctuations)

When trend and cyclical variations are removed from a set of time series data, the residual left, which may or
may not be random. Various techniques for analyzing series of this type examine to see “if irregular variation may
be explained in terms of probability models such as moving average or autoregressive  models, i.e. we can see if
any cyclical variation is still left in the residuals.These variation occur due to sudden causes are called residual
variation (irregular variation or accidental or erratic fluctuations) and are unpredictable

Irregular component is measured by variate difference method