COURSE – B.COM.

(6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

UNIT – 3 PAPER CODE – 34

SYLLABUS
 Analysis of Time Series – Meaning, importance and Purposes
 Components of Time Series
 Long Term Trend and Seasonal variation measurement
 Statistical Quality Control – Concept, utility and techniques. Construction of Control Charts for Variables and Attributes
LECTURE 1
TOPIC – Analysis of Time Series – Meaning, Importance and Purposes
“ A Time Series- consists of data arranged chronologically”
The time series is an arrangement of statistical data in accordance with the time of its occurrence.
Time series analysis is a specific way of analyzing a sequence of data points collected over an interval of time. In time series
analysis, analysts record data points at consistent intervals over a set period of time rather than just recording the data points
intermittently or randomly.
How Do You Analyze Time Series
Time series analysis involves the following steps:
1. Data collection, and cleaning
2. Preparing data visualization with reference to time vs major feature
3. Understanding and stationarity of the series
4. Generating charts to understand its work
5. Building AR, MA, ARIMA, and ARMA models
6. Generating actionable insights from prediction
Time series analysis is useful in:
 Measuring rainfalls
 Reading temperatures
 Monitoring heart rate (EKG), measuring cholesterol, tracking blood pressure
 Predicting quarterly sales
 Observing monthly sunspots, and global temperatures
 Brain monitoring (EEG)
Time series forecasting is used by organizations to predict the probability of upcoming events. It is one of the predictive
analytics techniques, which displays possible modifications in the data such as cyclic or seasonality behavior that offers a clear
insight related to data variables, and helps in better forecasting.
Different models of time analysis are:
 Classification: Finds and allocates categories to the data.
 Curve fitting: Puts the data along a curve to examine the connection of variables between the data.
 Descriptive analysis: Finds different patterns like trends, seasonal variation, or cycles in time series data.
 Explanative analysis: Tries to understand the relationships within data, cause, and effect.
 Exploratory analysis: Showcases the main characteristics of the data in a visual format.
 Intervention analysis: Examines how data can be affected by events.
 Segmentation: Divides the data into segments to display the underlying properties of the original information.
Advantages of Time Series Analysis
 Cleaning Data: Time series analysis helps in data cleaning by removing outliers and filtering out the noise. With
this, it is possible to identify the relevant signal in a data set.
 Understanding Data: With the help of time series analysis, analysts can easily understand a data set because the
models used in it assist to interpret the real meaning of data.
 Predict the Future: Time series forecasting techniques help analysts gain useful information about the future.
Disadvantages of Time Series Analysis
 The major disadvantage of time series analysis is it could result in wrong predictions because it is used for short-
term forecasting.
 It doesn’t provide the right project value.

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

UNIT – 3 PAPER CODE – 34
1. Q: What is time series analysis?
A: Time series analysis is a statistical technique used to analyze and forecast data points collected over time.
2. Q: What is a time series?
A: A time series is a sequence of data points measured at regular time intervals.
3. Q: What are the components of a time series?
A: The components of a time series are trend, seasonality, and residuals.
4. Q: What is trend in a time series?
A: Trend is the long-term direction or pattern in a time series.
5. Q: What is a time series model?
A: A time series model is a mathematical representation of a time series.
6. Q: What is ARIMA?
A: ARIMA (AutoRegressive Integrated Moving Average) is a popular time series model.
7. Q: What is stationarity in a time series?
A: Stationarity means that the statistical properties of a time series remain constant over time.
8. Q: What is non-stationarity in a time series?
A: Non-stationarity means that the statistical properties of a time series change over time.
9. Q: What is forecasting in time series analysis?
A: Forecasting is the process of predicting future values of a time series.
10. Q: What is the difference between forecasting and prediction?
A: Forecasting and prediction are often used interchangeably, but forecasting typically involves predicting future values of a
time series.
11. Q: What is time series decomposition?
A: Time series decomposition is the process of breaking down a time series into its components.
12. Q: What is seasonal decomposition?
A: Seasonal decomposition is the process of breaking down a time series into its seasonal and non-seasonal components.
13. Q: What are the applications of time series analysis?
A: Time series analysis has applications in finance, economics, and many other fields.
14. Q: What are the limitations of time series analysis?
A: Time series analysis assumes that the data is collected at regular time intervals and that the underlying patterns and
relationships remain constant over time.
15. Q: What are some real-world examples of time series analysis?
A: Time series analysis is used in many real-world applications, such as forecasting stock prices and predicting weather
patterns.
16. Q: How is time series analysis used in finance?
A: Time series analysis is used in finance to forecast stock prices, predict returns, and analyze risk.
17. Q: How is time series analysis used in economics?
A: Time series analysis is used in economics to forecast GDP, predict inflation, and analyze economic trends.

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

 UNIT – 3 PAPER CODE – 34

SYLLABUS
 Analysis of Time Series – Meaning, importance and Purposes
 Components of Time Series
 Long Term Trend and Seasonal variation measurement
 Statistical Quality Control – Concept, utility and techniques. Construction of Control Charts for Variables and Attributes
LECTURE2 TOPIC:- Components of Time Series Analysis

Components of Time Series

Secular Trend
It indicates the long-running pattern identified from the chain of data recorded. It can be increasing or decreasing, indicating
the future direction. Although it is commonly known as an average tendency of any aspect, the trend may vary in specific parts
oscillating between upward and downward. Still, the overall trend will depict a single movement only, either upward or
downward. For example, in summer, the temperature may rise or decline in a day, but the overall trend during the first two
months will show how the heat has been rising from the beginning.
Seasonal Trend
Seasonal variations represent the presence of rhythmic patterns. Certain pattern repeatedly occurs at the same period or point
every year. For example, the sale of umbrellas increases during the rainy season, and air conditioners increase during summer.
Apart from natural occurrences, man-made conventions like fashion, marriage season, festivals, etc., play a key role in
contributing to seasonal trends.
Cyclical Variations
It represents a cyclical pattern composed of up and down movement. It may span more than one year and go from phase to
phase to complete a cycle. A business cycle is a significant example of a cyclic variation, denoted that a business goes through
four stages in its life. Starting from the introduction, expansion, prosperity, and decline. How well the company can perform
and stretch its phases depends on its performance.
Irregular Variations
It refers to variations that are uncontrollable and inevitable. It occurs randomly, opposite to regular changes or occurrences,
and does not associate with a pattern. These fluctuations are unpredictable and unexplainable. Forces like natural and man-
made disasters can trigger irregular variations.
Time Series Analysis
Analysis of time-stamped data constructed helps derive meaningful statistics and contributes to decision making. For example,
it is used to understand and interpret trends and patterns. In addition, it helps in prediction, classification, segmentation,
descriptive and intervention analysis, etc.
Its application is generally seen with non-stationary data to observe how certain things change over time. Examples include its
vital application in the stock market, forex historical dataset, sales, inventory, and weather analysis. Hence expertise in it is
important among the professionals from fields like retail, financial market, sales, weather forecasting, etc.

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

 UNIT – 3 PAPER CODE – 34

1. Q: What is the trend component in a time series?

A: The trend component is the long-term direction or pattern in a time series.
2. Q: How is the trend component identified?
A: The trend component is identified by analyzing the overall direction of the time series over a long period.
3. Q: What is the seasonal component in a time series?
A: The seasonal component is the regular fluctuation in a time series that occurs at fixed intervals.
4. Q: How is the seasonal component identified?
A: The seasonal component is identified by analyzing the regular patterns in the time series that occur at fixed intervals.
5. Q: What is the cyclical component in a time series?
A: The cyclical component is the long-term fluctuation in a time series that is not seasonal.
6. Q: How is the cyclical component identified?
A: The cyclical component is identified by analyzing the long-term patterns in the time series that are not seasonal.
7. Q: What is the irregular component in a time series?
A: The irregular component is the random or unpredictable variation in a time series.
8. Q: How is the irregular component identified?
A: The irregular component is identified by analyzing the random or unpredictable patterns in the time series.
9. Q: What is time series decomposition?
A: Time series decomposition is the process of breaking down a time series into its components.
10. Q: What are the methods of time series decomposition?
A: The methods of time series decomposition include additive and multiplicative decomposition.
11. Q: What is an additive model in time series analysis?
A: An additive model assumes that the components of a time series are added together.
12. Q: What is a multiplicative model in time series analysis?
A: A multiplicative model assumes that the components of a time series are multiplied together.
13. Q: What is a seasonal index?
A: A seasonal index is a measure of the seasonal component in a time series.
14. Q: How is a seasonal index calculated?
A: A seasonal index is calculated by analyzing the seasonal patterns in a time series.
15. Q: What is time series smoothing?
A: Time series smoothing is the process of reducing the random variation in a time series.
16. Q: What are the methods of time series smoothing?
A: The methods of time series smoothing include moving averages and exponential smoothing.
17. Q: What are the applications of time series decomposition?
A: Time series decomposition has applications in forecasting, prediction, and analysis of time series data.
18. Q: What are the limitations of time series decomposition?
A: Time series decomposition assumes that the components of a time series are distinct and can be separated
19. Q: What are some real-world examples of time series decomposition?
A: Time series decomposition is used in many real-world applications, such as forecasting sales and predicting weather patterns.
20. Q: How is time series decomposition used in finance?
A: Time series decomposition is used in finance to forecast stock prices and predict returns.
25. Q: How is time series decomposition used in economics?
A: Time series decomposition is used in economics to forecast GDP and predict inflation.

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

 UNIT – 3 PAPER CODE – 34
LECTURE 3
TOPIC – MEASUREMENT OF TIME SERIES ANALYSIS
MEASUREMENT OF SEASONAL VARIATIONS
The measurement of seasonal variations is of paramount importance and use in the analysis of time series related to economic
and business world. It, on the one hand, does help in short-term planning of business activities and on the other hand measures
can be taken to avoid losses from such variations. The following are the important methods of measuring seasonal variations :
1.Simple Average or Seasonal Averages or Seasonal Variation Index Method
This method is used when there is no definite long-term trend in the data.
Seasonal (Variation) Index No.= (Monthly Avg. of specific month/General Average) *100
2. Seasonal Variation through Moving Averages
If the original data of the time series is affected by trend then seasonal variations can be measured by using moving averages.
3. Link Relative Method
This method is based on the assumption that the trend is linear and cyclical variations are of uniform pattern.
4. Ratio-to-trend Method
This model is based on multiplicative model. This method is used when cyclical fluctuations are absent from the data i.e. time
series variable Y consists of trend, seasonal and random components.
Seasonal Index No. = (Seasonal Average of Ratio-to-trend/General Average of Ratio-to-trend)*100
5. Ratio-to-moving Average Method.
This method is also known as percentage of moving average method.
Seasonal variation indices are obtained on the basis of general average of Arithmetic means equal to 100.
MEASUREMENT OF LONG TERM TREND
1)FREE HAND CURVE METHOD
This is the simple method of studying trend. This method is also called as ‘Graphic Method’ or ‘Curve fitting by inspection.’
MERITS:
1. It is simple method of estimating trend which requires no mathematical calculations.
2. It is a flexible method as compared to rigid mathematical trends and, therefore, a better representative of the trend of the
data.
2) METHOD OF SEMI-AVERAGES
Under this method, as the name itself suggests semi-averages are calculated to find out the trend values.
MERITS:
1. It is simple method of measuring trend.
2. It is an objective method because anyone applying this to a given data would get identical trend value.
DEMERITS:
1. This method can give only linear trend of the data irrespective of whether it exists or not.
2. This is only a crude method of measuring trend, since we do not know whether the effects of other
components are completely eliminated or not.
3) METHOD OF MOVING-AVERAGES
This method is based on the principle that the total effect of periodic variations at different points of time in its cycle gets
completely neutralized, i.e. ∑St = 0 in one year and ∑Ct = 0 in the periods of cyclical variations.
MERITS:
This method is easy to understand and easy to use because there are no mathematical complexities involved.
DEMERITS
It is not possible to calculate trend values for all the items of the series. Some information is always lost at its ends.
METHOD OF LEAST SQUARES
This is one of the most popular methods of fitting a mathematical trend. The fitted trend is termed as the best in the sense that
the sum of squares of deviations of observations, from it, is minimized. This method of Least squares may be used either to fit
linear trend or a non-linear trend (Parabolic and Exponential trend).
FITTING A STRAIGHT LINE TREND
Yt = a + bt
FITTING A PARABOLIC TREND
Yt =a + bt+ct^2
FITTING A EXPONENTIAL TREND - Y = a.b^t

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

 UNIT – 3 PAPER CODE – 34

SYLLABUS
 Analysis of Time Series – Meaning, importance and Purposes
 Components of Time Series
 Long Term Trend and Seasonal variation measurement
 Statistical Quality Control – Concept, utility and techniques. Construction of Control Charts for Variables and Attributes

LECTURE 3
TOPIC – MEASUREMENT OF TIME SERIES ANALYSIS

LONG QUESTIONS – Mention different methods of measurement of seasonal Variations and long term trend.
SHORT ANSWER QUESTIONS-

(a) Mention two points on Simple Average or Seasonal Averages.

Ans. This method is used when there is no definite long-term trend in the data.
Seasonal (Variation) Index No.= (Monthly Avg. of specific month/General Average) *100

(b) Mention one point on Seasonal Variation through Moving Averages

Ans. If the original data of the time series is affected by trend then seasonal variations can be measured by using moving
averages.

(3c) Mention two merits of Free hand Curve method.

Ans. 1. It is simple method of estimating trend which requires no mathematical calculations.
2. It is a flexible method as compared to rigid mathematical trends and, therefore, a better representative of the trend of the
data.

(3d) Mention two merits of method of semi- averages.

Ans. 1. It is simple method of measuring trend.
2. It is an objective method because anyone applying this to a given data would get identical trend value.

(3e) Mention one merit and demerit of method of moving averages.

Ans. MERITS:
This method is easy to understand and easy to use because there are no mathematical complexities involved.
DEMERITS
It is not possible to calculate trend values for all the items of the series. Some information is always lost at its ends.

(3f) Write equation of fitting a straight line trend.

Ans. Yt = a + bt

(3g) Write equation of fitting a parabolic trend.

Ans. Yt =a + bt+ct^2

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

 UNIT – 3 PAPER CODE – 34

TOPIC – MEASUREMENT OF TIME SERIES ANALYSIS

LONG QUESTIONS – Mention different methods of measurement of seasonal Variations and long term trend.

ASSIGNMENT QUESTIONS

(a) Mention two points on Simple Average or Seasonal Averages.

Ans. ____________________________________________________________________________________________________

________________________________________________________________________________________________________

(b) Mention one point on Seasonal Variation through Moving Averages

Ans. ____________________________________________________________________________________________________

________________________________________________________________________________________________________

(c) Mention two merits of Free hand Curve method.

Ans. ____________________________________________________________________________________________________

________________________________________________________________________________________________________

(d) Mention two merits of method of semi- averages.

Ans. ____________________________________________________________________________________________________

________________________________________________________________________________________________________

(e) Write equation of fitting a straight line trend.

Ans. ____________________________________________________________________________________________________

________________________________________________________________________________________________________

(f) Write equation of fitting a parabolic trend.

Ans. ____________________________________________________________________________________________________

_______________________________________________________________________________________________________

COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS

 UNIT – 3 PAPER CODE – 34

LECTURE 4
TOPIC – STATISTICAL QUALITY CONTROL AND CONTROL CHARTS
According to Simpson and Kafka, "Statistical quality control means the employment of various statistical principles in quality
control programmes."
According to R.C. David, “Statistical quality control is a technique, which is based on the principle of probability and makes it
simple to control the variation in qualities.”
ADVANTAGES OR IMPORTANCE
(1) Economy in Inspection : S. Q. C. is based on sampling inspection in place of 100% inspection. It saves time, labour and
money.
(2) Early detection of faults: S. Q. C. implies inspection of manufacturing process at different stages on continuous basis. It
ensures an early detection of faults and, hence, a minimum waste of rejected production.
(3) Proper analysis of variation: S. Q. C. involves in finding out variations in the quality of product. If they exist, proper analysis
is made and if assignable causes are identified, necessary corrective measures are taken. It all helps in smoothening the
production system.
(4) Quality Consciousness: S. Q. C. creates quality consciousness among producers, employees and customers. The producer
determines the quality, the employees do work accordingly and the customers can estimate the reliability of the product on this
basis.
(5) Evaluation of various components of production system: S. Q. C. does help in the evaluation of the various components of
production system. If there are variations and assignable causes are identified, it can be find out whether raw material is
defective or labour is inefficient or machines require replacement.
(6) Reduction in cost: With the help of S. Q. C., it is possible to remove constraints in production system, to prevent unnecessary
wastage and to avoid unnecessary inspection. It all reduces the cost of production.
STATISTICAL QUALITY CONTROL – METHODS OR TECHNIQUES
(1)Process Control – Under process control the production process of the product under production is controlled, so that final
product may be as pre-determined standard.
(2) Product Control – It is also called as ‘Acceptance Control’ or ‘Acceptance Sampling’. It is concerned with the inspection of
finished goods and decision that whether it is according the prescribed standard or not.
CONTROL CHARTS
According to Simpson and Kafka,” Control charts are simple, routinised devices for checking the pattern of a process…(they) may
be viewed as a graphic presentation of a running test of Statistical significance.”
CONTROL CHARTS FOR VARIABLES
 X¯ chart
 R Chart
 S Chart
X¯ chart describes the subset of averages or means, R chart displays the subgroup ranges, and S chart shows the subgroup
standard deviations. Regarding the quality that is to be measured on a continuous scale, a particular analysis makes both the
process mean and its variability apparent along with a mean chart that is aligned over its corresponding S- or R- chart.
CONTROL CHARTS FOR ATTRIBUTES

This type of data is usually continuous and based on the theoretical concept of continuous data. Count data is a different kind of

data available which is also known as level counts of character data. The interesting variable is a unique count here for the

number of blemishes or defects per subgroup. These attribute charts are appropriately applied for such discrete count data.
FEATURES OF CONTROL CHARTS

 Points represent a statistic of measurements of a quality characteristic in samples taken from the process of the data
at different times. Here, the statistic can be a mean, range, proportion, etc.
 For all samples, the mean of this statistic is calculated. For example, the mean of the means, the mean of the ranges,
the mean of the proportions.
 At the mean of the statistic, a centerline must be drawn.
 For all the samples, the standard deviation of the statistic is to be calculated.
 The natural process limits, i.e. upper and lower control limits (these are separate lines), indicate the origin at which
the process output is considered statistically ‘unlikely’ and typically drawn at three standard deviations from the
centerline. That means two standard deviations above and below the centerline.
COURSE – B.COM. (6th Semester) SUBJECT – APPLIED BUSINESS STATISTICS
UNIT – 3 PAPER CODE – 34
1. Q: What is Statistical Quality Control (SQC)?
A: SQC is a set of statistical techniques used to monitor and control processes to ensure quality.
2. Q: What is the primary goal of SQC?
A: The primary goal of SQC is to detect and eliminate variations in a process.
3. Q: What is a control chart?
A: A control chart is a graphical tool used to monitor a process and detect deviations from the norm.
4. Q: What are the two types of control charts?
A: The two types of control charts are Variable Control Charts and Attribute Control Charts.
5. Q: What is a variable control chart?
A: A variable control chart is used to monitor continuous data, such as length or weight.
6. Q: What is an attribute control chart?
A: An attribute control chart is used to monitor categorical data, such as pass/fail or yes/no.
7. Q: What is the center line on a control chart?
A: The center line on a control chart represents the average or mean of the process.
8. Q: What are control limits?
A: Control limits are the upper and lower limits on a control chart that indicate when a process is out of control.
9. Q: What is the formula for calculating the upper control limit (UCL)?
A: UCL = x̄ + 3σ (where x̄ is the mean and σ is the standard deviation).
10. Q: What is the formula for calculating the lower control limit (LCL)?
A: LCL = x̄ - 3σ (where x̄ is the mean and σ is the standard deviation).
11. Q: What is a run of data on a control chart?
A: A run of data on a control chart is a series of consecutive points that are all above or all below the center line.
12. Q: What does a run of data indicate?
A: A run of data indicates a shift in the process mean or variability.
13. Q: What is a trend on a control chart?
A: A trend on a control chart is a series of consecutive points that are all increasing or all decreasing.
14. Q: What does a trend indicate?
A: A trend indicates a gradual shift in the process mean or variability.
15. Q: What is a cycle on a control chart?
A: A cycle on a control chart is a repeating pattern of data that occurs over time.
16. Q: What does a cycle indicate?
A: A cycle indicates a periodic variation in the process.
17. Q: What is the purpose of a p-chart?
A: A p-chart is used to monitor the proportion of defective items in a sample.
18. Q: What is the purpose of a c-chart?
A: A c-chart is used to monitor the number of defects per unit.
19. Q: What is the purpose of an X-bar chart?
A: An X-bar chart is used to monitor the mean of a process.
20. Q: What is the purpose of an R-chart?
A: An R-chart is used to monitor the range of a process.
21. Q: What is the difference between a Type I error and a Type II error in SQC?
A: A Type I error occurs when a true null hypothesis is rejected, while a Type II error occurs when a false null hypothesis is not
rejected.
22. Q: What is the probability of a Type I error?
A: The probability of a Type I error is denoted by alpha (α).
23. Q: What is the probability of a Type II error?
A: The probability of a Type II error is denoted by beta (β).
24. Q: What is the power of a statistical test?
A: The power of a statistical test is the probability of detecting a true effect.
25. Q: What is the purpose of a capability analysis?
A: A capability analysis is used to determine whether a process is capable of producing output within specifications.