Chapter 6 Time series decomposition
Time series data can exhibit a variety of patterns, and it is often helpful to split a time series into several components, each representing an underlying pattern category.
In Section 2.3 we discussed three types of time series patterns: trend, seasonality and cycles. When we decompose a time series into components, we usually combine the trend and cycle into a single trend-cycle component (sometimes called the trend for simplicity). Thus we think of a time series as comprising three components: a trend-cycle component, a seasonal component, and a remainder component (containing anything else in the time series).
In this chapter, we consider some common methods for extracting these components from a time series. Often this is done to help improve understanding of the time series, but it can also be used to improve forecast accuracy.