Time Series Analysis

Key points
01 Time Series Analysis

02 Spurious regression

03 Stationarity and Non Stationarity time series

04 Tests for Stationarity

Time series analysis
Time series analysis is a statistical technique that deals with time
series data.
Time series data
Time series data is data that is collected at different points
in time.
Stochastic process
A random or stochastic process is a collection of random variables
ordered in time.
Spurious or Non-sense regression
Spurious or nonsense regression, first discovered by Yule (1974)
showed that (spurious) correlation could persist in nonstationary
time series.

Gujarati, page # 806

Presence of Spurious Regression
 If the of the regression is greater than the Durbin-Watson
(DW) statistic then use the first difference form whenever
DW < . (Maddala)
 If the residual series of the regression has a Unit Root.
Stationary Series
A stochastic process is said to be stationary if its mean and variance
are constant over time and the value of the covariance between
the two time periods depends only on the distance or gap or lag
between the two time periods and not the actual time at which the
covariance is computed
Non Stationary Series
A stationary (time) series is one whose statistical properties such as
the mean, variance and covariance can change over time.
Tests for Stationarity
 Graphical analysis
 Autocorrelation Function (ACF) and Correlogram
 The Unit Root test
 The Augmented Dickey–Fuller (ADF) Test
Thank You!