Stationarity & Differencing

Summary

A stationary series has statistical properties (mean, variance) that don't change over time — many classical forecasting models require this, and differencing (subtracting each value from the previous one) is the standard way to achieve it.

• 1Run a statistical test (e.g. Augmented Dickey-Fuller) to check if a series is stationary.
• 2Apply differencing to a non-stationary series and re-test.
• 3Learn why non-stationary data can produce misleading forecasts if fed directly into certain models.