statisticstrenddrift

What is the difference between drift and trend in a time series?


I am analyzing a time series using the unit root test. I am stuck in that I do not understand the difference between trend and drift in the time series. Is it correct to say that trend is a feature of a time series, whose average changes over time and that drift is a feature of a time series, whose variance changes over time?


Solution

  • Drift is an intercept(static) component in a time series.

    c being the drift(intercept) component here.


    Trend is represented as a time variant component δt, observe the below equation.

    Trend being a time variant increase or decreases over time, so your statement of changing average is true.

    I hope this clears your doubt between the two!