# Time Series Analysis: Simple and Log-linear Trend Models

**Simple Time Series Models**

- This is basic trend modeling.

A simple trend model can be expressed as follows:

yt = b0 + b1t+ εt

b0 = the y-intercept; where t = 0.

b1 = the slope coefficient of the time trend.

t = the time period.

ŷt = the estimated value for time t based on the model.

ei = the random error of the time trend.

The big validity pit-fall for simple trend models is serial correlation; if this problem is present, then you will see an artificially high R2 and your slope coefficient may falsely appear to be significant.

There is a visual way to detect serial correlation (not shown) or you can perform a Dubin-Watson test.

**Log-linear Trend Models**

- This applies to non-linear time series trends.

The structure is:

ln yt = b0 + b1t+ et; or

yt \= e b0 + b1t + et

Again, like the simple trend model, use a graph or Durbin Watson test to check for serial correlation, as this will be a big threat to validity.

- CFA L2: Quantitative Methods - Introduction
- Quants: Correlation Analysis
- Quants: Single Variable Linear Regression Analysis
- Standard Error of the Estimate or SEE
- Confidence Intervals (CI) for Dependent Variable Prediction
- Coefficient of Determination (R-Squared)
- Analysis of Variance or ANOVA
- Multiple Regression Analysis
- Multiple Regression and Coefficient of Determination (R-Squared)
- Fcalc – the Global Test for Regression Significance
- Regression Analysis and Assumption Violations
- Qualitative and Dummy Variables in Regression Modeling
- Time Series Analysis: Simple and Log-linear Trend Models
- Auto-Regressive (AR) Time Series Models
- Auto-Regressive Models - Random Walks and Unit Roots
- ARMA Models and ARCH Testing
- How to Select the Most Appropriate Time Series Model?

# R Programming Bundle: 25% OFF

**R Programming - Data Science for Finance Bundle**for just $29 $39.