DSE Time Series Analysis and Forecasting

Question 1

What property of a time series indicates that its statistical properties such as mean and variance remain constant over time?

Accepted Answer

Stationarity

Answer

Stationarity means a time series has constant mean, variance, and autocovariance over time, which is required by many standard forecasting models.

Question 2

Which statistical test is most commonly used to check whether a time series is stationary by testing for a unit root?

Accepted Answer

Augmented Dickey-Fuller (ADF) test

Answer

The Augmented Dickey-Fuller test checks for a unit root in a time series; failing to reject the null hypothesis indicates the series is non-stationary.

Question 3

What does the Autocorrelation Function (ACF) measure in time series analysis?

Accepted Answer

The correlation between a time series and a lagged version of itself

Answer

The ACF measures the correlation between a time series and its own lagged values at different time lags, helping identify patterns and the order of MA terms.

Question 4

What is the primary purpose of differencing in time series analysis?

Accepted Answer

To make a non-stationary series stationary

Answer

Differencing subtracts each observation from the previous one, eliminating trends and transforming a non-stationary series into a stationary one.

Question 5

In classical time series decomposition, which component represents patterns that repeat at fixed, known intervals such as monthly or yearly cycles?

Accepted Answer

Seasonal component

Answer

The seasonal component captures repeating patterns at fixed, known intervals (e.g., higher retail sales every December), distinct from longer irregular cyclic swings.

DSE - Data Science Practice Test

DSE - Data Science Practice Test

DSE Time Series Analysis and Forecasting