7.5 Models

Additive Model

\(Y_t = T_t + S_t + C_t + R_t\)

• \(C_t\) and \(S_t\) can be \(\pm\)ve
• \(R_t\) can also be \(\pm\)ve, but in the long run, \(\sum R_t = 0\)

Multiplicative Model

• \(Y_t = T_t \times S_t \times C_t \times R_t\)
• \(S_t, C_t, R_t\) refer to deviation from unit
• \(S_t\) equals unity in 1 year, \(C_t\) in a cycle, and GM of \(R_t\) is unity (1).