A Note on the Trade-off between Direct and Indirect Seasonal Adjustments
(English)Manuscript (preprint) (Other academic)
Direct and indirect seasonal adjustments can be viewed as opposite formulations of an error minimization problem that occurs when seasonally adjusting a system of time series. In this study, a loss function is formulated that is a weighted combination of the errors of the input time series and the aggregate error. Holt-Winters’ exponential smoothing methods on squared error loss functions or robust Huber loss functions are applied to quarterly Swedish GDP and monthly foreign trade data. All input series are seasonally adjusted jointly but still univariately and trade-off point between direct and indirect seasonal adjustments are estimated. The quadratic loss function is found to cause larger differences between direct and indirect seasonal adjustments than the Huber loss function does. Results indicate that pure indirect seasonal adjustment should be avoided for GDP and pure direct seasonal adjustment should be avoided for foreign trade. Adjustments in between with a combined loss function seem to work well for all purposes.
direct/indirect seasonal adjustment, Huber loss function, exponential smoothing, trade-off
Probability Theory and Statistics
Research subject Statistics
IdentifiersURN: urn:nbn:se:su:diva-89347OAI: oai:DiVA.org:su-89347DiVA: diva2:617325