Posted in Finance, Accounting and Economics Terms, Total Reads: 344
Detrend is the statistical process of determining the absolute changes observed in a data set. It is used in determining the pattern in a forecasting model. As the name suggests, detrend is the opposite of trend, in which data is assumed to determine the pattern in the data set.
The process of detrend is performed by eliminating the effects of the data sets accumulated from a trend and to come out with only the absolute changes left in the values thereby allowing the potential patterns of the forecast to be identified. Detrend is carried out using regression and other statistical methods of forecasting.
Detrend is done because the removal of trend from the data sets allows one to focus their analysis on the fluctuations observed in the data about the trend. Trends are usually meaningful for forecasting but sometimes removing the trends or detrending helps in getting better insights of the forecast. The data remaining after the detrending is performed is called fluctuation or variability.