Steph Locke answers an important question related to time series:
Additive or multiplicative?
It’s important to understand what the difference between a multiplicative time series and an additive one before we go any further.
There are three components to a time series:
– trend how things are overall changing
– seasonality how things change within a given period e.g. a year, month, week, day
– error/residual/irregular activity not explained by the trend or the seasonal value
How these three components interact determines the difference between a multiplicative and an additive time series.
Click through to learn how to spot an additive time series versus a multiplicative. There is a good bit of very important detail here.