Advantages and Disadvantages of Graphs in Time Series Analysis

This article discusses the advantages and disadvantages of using graphical plots like boxplots, histograms, and kernel density plots in time series analysis. It explains how to interpret time-series data with graphical plots and provides examples of how different financial indicators can be visualized with these plots. The article also highlights the limitations of each type of plot.

Running Head: ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES
ANALYSIS
Advantages and Disadvantages of Graphs in Time Series Analysis
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1ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
Table of Contents
1. Introduction and Background:.....................................................................................................2
2. Discussion:...................................................................................................................................2
2.1 Boxplots:................................................................................................................................2
2.2 Histograms:............................................................................................................................4
2.3 Kernel density plots:..............................................................................................................5
3. Summary:.....................................................................................................................................6
4. References:..................................................................................................................................7

2ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
1. Introduction and Background:
Graphical plots and charts are broadly utilized almost every kind of data or report and the
plots time series analysis is not an exception in that case. Generally graphical plots like boxplots,
histograms and kernel density plots are often utilized for visual representation and analysis of
time series data. Month or year wise plots can be extracted from economic or financial time
series data that is more vibrant and communicable.
2. Discussion:
The goal of time series plot is to investigate the inherent pattern of the data set. The
executive dashboards that consists various types of time series plots are beneficial for
interpreting a time-series data (Adhikari & Agrawal, 2013). The movement of closing price
indexes, year wise natural incidents (such as- rain, fire and snowfall) and population-oriented
indexes could be visualized with the help of daily histograms. Time series is no doubt a complex
field of data visualization that consists to study the evolution of one or more than one variables
through time.
2.1 Boxplots:
Box-plots are mainly the visualization of location measures. It includes the three quartiles
and terminal values of the data set.

3ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
Figure 1: Box-plot of time-series data of GBP/PLN exchange rates
Advantages:
1) The box-plots are able to handle and represent a five-number summary of large data.
2) It indicates the median and quartiles of large data sets.
3) Hence, box-plot is completely a location referring graph that organizes data in an efficient
way to deal and manage.
4) The key advantage of box-plot is that it easily handles the data sets of extremely large size
easily.
Disadvantage:
1) Common measures of central tendency like mode and mean could not be identified in a box-
plot.
2) One more prominent disadvantage of it is that box-plot is not as visually appealing as other
graphs.

4ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
2.2 Histograms:
Many financial indicators such as intra-daily returns of ‘S&P-500’ are perfectly could be
visualized with the help of a histogram. It also guides to have one step ahead of forecasting of
financial analysis.
Figure 2: Histogram plot of time-series data
Advantages:
1) Huge number of numerical data set could be fitted easily with a histogram.
2) The basic advantages of histogram plot are that it is visually strong and could be compared
with the normal curve.
3) The basic approach of histogram is that it arranges the data set in an arranged order.
Disadvantages:
1) Histogram is only capable of using continuous data.
2) Histogram fails to read exact values as data is grouped into various categories.

5ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
2.3 Kernel density plots:
The Kernel density plot generates a smooth curve that estimate the p.d.f (probability
density function) of a continuous variable from a set of scores that likely include some error
(Guajardo, Weber & Miranda, 2010).
It is a notable fact that when widths are held constant, various kernels may produce
surprisingly different outcomes. It is an attribute of the kernel and width combination; some
kernels are even more sensitive than others to identify peaks in the estimation of density.
Figure 3: Kernel density plot of time-series plot of temperatures by region
Advantages:
1) The kernel density plot is constructed by a non-negative valued function.
2) The kernel density plot is constructed with the help of real-valued function.
Disadvantages:
1) The kernel density plot of time-series data that depends strongly on the choice of x0 and h.
2) The kernel density plot is often asymmetric for any financial or economic time series data.

6ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
3. Summary:
The concentration of time series data of agricultural sector of industrial sector are well
established by box-plots. The stock prices of different organizations could be created and
compared for each interval in a time series data visualized in a Box-Whisker plot (Box et al.,
2015). Box-whisker plot spot out the outliers and compares with the help of consistent intervals.
The monthly or quarterly data of ‘Gross domestic product’ (GDP), ‘Government consumption
expenditures’ and ‘Gross investment’ of any country could be easily shown in box-plot and
histogram which would be complicated to show with the help of histogram plots.

7ADVANTAGES AND DISADVANTAGES OF GRAPHS IN TIME SERIES ANALYSIS
4. References:
Adhikari, R., & Agrawal, R. K. (2013). An introductory study on time series modeling and
forecasting. arXiv preprint arXiv:1302.6613.
Box, G. E., Jenkins, G. M., Reinsel, G. C., & Ljung, G. M. (2015). Time series analysis:
forecasting and control. John Wiley & Sons.
Guajardo, J. A., Weber, R., & Miranda, J. (2010). A model updating strategy for predicting time
series with seasonal patterns. Applied Soft Computing, 10(1), 276-283.