Moving average

A method used to smooth time-series data. It forms a new smoothed series in which the irregular component is reduced.

If the time series has a seasonal component a moving average is used to eliminate the seasonal component.

Each value in the time series is replaced by an average of the value and a number of neighbouring values. The number of values used to calculate a moving average depends on the type of time-series data. For weekly data, seven values are used; for monthly data, 12 values are used; and for quarterly data, four values are used. If the number of values used is even, the moving average must be centred by taking a two-term moving average of the new series.

In terms of an additive model for time-series data, Y = T + S + C + I, where

          T represents the trend component,

          S represents the seasonal component,

          C represents the cyclical component, and

          I represents the irregular component;

the smoothed series = T + C.

See: centred moving average, moving mean

Curriculum achievement objectives reference

Statistical investigation: (Level 8)

The quality of the images on this page may vary depending on the device you are using.