Solved – What’s the point of time series analysis

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What is the point of time series analysis?

There are plenty of other statistical methods, such as regression and machine learning, that have obvious use cases: regression can provide information on the relationship between two variables, while machine learning is great for prediction.

But meanwhile, I don't see what time series analysis is good for. Sure, I can fit an ARIMA model and use it for prediction, but what good is that when the confidence intervals for that prediction are going to be huge? There's a reason nobody can predict the stock market despite it being the most data-driven industry in world history.

Likewise, how do I use it to understand my process further? Sure, I can plot the ACF and go "aha! there's some dependence!", but then what? What's the point? Of course there's dependence, that's why you are doing time series analysis to begin with. You already knew there was dependence. But what are you going to use it for?

Best Answer

One main use is . I have been feeding my family for over a decade now by forecasting how many units of a specific product a supermarket will sell tomorrow, so he can order enough stock, but not too much. There is money in this.

Other forecasting use cases are given in publications like the International Journal of Forecasting or Foresight. (Full disclosure: I'm an Associate Editor of Foresight.)

Yes, sometimes the s are huge. (I assume you mean PIs, not s. There is a difference.) This simply means that the process is hard to forecast. Then you need to mitigate. In forecasting supermarket sales, this means you need a lot of safety stock. In forecasting sea level rises, this means you need to build higher levees. I would say that a large prediction interval does provide useful information.

And for all forecasting use cases, analyis is useful, though forecasting is a larger topic. You can often improve forecasts by taking the dependencies in your time series into account, so you need to understand them through analysis, which is more specific than just knowing dependencies are there.

Plus, people are interested in time series even if they do not forecast. Econometricians like to detect change points in macroeconomic time series. Or assess the impact of an intervention, such as a change in tax laws, on GDP or something else. You may want to skim through your favorite econometrics journal for more inspiration.

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