Seasonal variation is a component of a time series which is defined as the repetitive and predictable movement around the trend line in one year or less. It is detected by measuring the quantity of interest for small time intervals, such as days, weeks, months or quarters.
By the definition seasonal variations are the changes in inventory levels, profits, sales volume, and so on caused by seasonality of the business.
By the definition a time series s is a set of observations recorded according to some period of time. The observations are usually recorded at equal intervals of time to estimate the future values of time series and to cope with uncertainty about future.
The general direction of the price of an asset or market. Trends can be thought of in varying lengths including short, intermediate and long term. If one can identify a trend, it can be highly profitable as you will be able to trade with the trend.
By the definition a trend is a line on the price or value chart of a security depicting the general direction in which the security is headed. This chart shows an example of an upward trend line.
REASONS FOR STUDYING SEASONAL VARIATION
- It gives way to compare two time intervals
- It predicts the short range patterns such as the demand for cold drinks in the summer
- The description of the seasonal effect provides a better understanding of the impact this component has upon a particular series.
- After establishing the seasonal pattern, methods can be implemented to eliminate it from the time-series to study the effect of other components such as cyclical and irregular variations. This elimination of the seasonal effect is referred to as depersonalizing or seasonal adjustment of data.