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. 15 min read, ~2,183 words.
Deterministic trend:. Fit by OLS on. Forecast variance stays bounded as horizon grows. Stochastic trend (random walk):. The trend is a cumulative sum of shocks. Forecast variance grows linearly in horizon. Seasonal dummies: add indicator regressors (one season is the baseline) to capture additive seasonality of period. Detrend vs difference...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- D3
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