Calculate trends and seasonality using time series with regression (e.g., deterministic vs. stochastic trend).
Free CAS MAS-II (Modern Actuarial Statistics II) lesson in Time Series with Constant Variance. 16 min read, ~2,384 words.
Deterministic trend:, fit by OLS on; residuals mean-revert to the line and forecast variance stays bounded as the horizon grows. Stochastic trend (random walk): is a cumulative sum of shocks whose level never reverts, so -step forecast variance grows linearly as. Seasonal dummies: add indicator regressors (one season is the...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- D3
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