Everything about Seasonal Adjustment totally explained
Seasonal adjustment is a
statistical method for removing the seasonal component of a
time series used when analyzing non-seasonal trends.
Time Series Components
The investigation of many economic
time series becomes problematic due to seasonal fluctuations. Series are made up of four components:
S
t: The Seasonal Component
T
t: The
Trend Component
C
t: The
Cyclical Component
I
t: The
Error, or irrelevant component.
Seasonal Adjustment
Unlike the trend and cyclical components, seasonal components, theoretically, happen at in the same magnitude during over the same period of time each year. The seasonal component of a series are often considered uninteresting and cause a series to be ambiguous. By removing the seasonal component, it's easier to focus on other components.
Different statistical research groups have developed different methods of seasonal adjustment. The
United States Census Bureau has developed
X-12-ARIMA. The
Federal Statistical Office of Germany has developed the application software
BV4.1 for decomposing and seasonally adjustment which bases on the statistical method
berlin procedure.
Example
One famous example is the rate of unemployment which is also presented by a time series. Particularly this rate depends on seasonal influences. This is why it's important to free the unemployment rate of its seasonal component. As soon as the seasonal influence is removed from this time series the real trend of the unemployment rate is visible. Seasonal adjustment is mostly used in the official statistics implemented by statistical software.
Further Information
Get more info on 'Seasonal Adjustment'.
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