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R-comments - Indicator Variables for Seasonal Time Series A...

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Unformatted text preview: Indicator Variables for Seasonal Time Series A simple way to estimate seasonal effects in a time series; e.g., for quarterly data: Set up four indicator (dummy) variables, one for each quarter; Use them as inputs in a regression model. Similarly for monthly data: twelve monthly indicators. 1 In R, you can create the indicators manually. E.g., for a series x , Shumway and Stoffer suggest essen- tially: Q1 = rep(c(1, 0, 0, 0), length(x) / 4) etc. You can then use lm() to fit the regression; E.g., for the Johnson & Johnson quarterly earnings, fitting a linear trend and the quarterly indicators: summary(lm(log(jj) time(jj) + Q1 + Q2 + Q3 + Q4)) For a monthly series, this would be tedious. 2 R has some tools that can help: If x is a seasonal time series (i.e., frequency(x) > 1 ), cycle(x) creates a companion time series whose value is the corre- sponding season....
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This note was uploaded on 05/26/2010 for the course STAT 443 taught by Professor Yuliagel during the Winter '09 term at Waterloo.

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R-comments - Indicator Variables for Seasonal Time Series A...

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