Stochastic Trends

Overview

Stochastic trends are trends that may appear in any particular realization of a time series, but is not present in all points in the sample space. Stochastic trends appear out of the randomness, as their name suggests, and are not trends that can be relied on to make forecasts.

Stochastic trends arise out of non-stationary time series. The presence of these trends will make most statistics run on the time series irrelevant. The typical way to deal with a stochastic trend is to difference the series first and then model the new series.