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Explanation: Stationarity in time series data is a critical assumption for applying ARIMA models. ARIMA (AutoRegressive Integrated Moving Average) is designed to work with data that has constant mean, variance, and autocovariance over time. Stationary data ensures the model's stability, enabling accurate predictions and parameter estimation. If the data is not stationary, the ARIMA model's results may be unreliable. Non-stationary data can lead to misleading forecasts, as the underlying patterns are not stable. Techniques like differencing, logarithmic transformations, or the Dickey-Fuller test are employed to achieve stationarity. Option A: While ARIMA addresses autocorrelation, stationarity is needed for foundational assumptions, not just for residual issues. Option B: Stationarity helps improve model accuracy but is not the primary reason for its necessity. Option D: Decomposition is a separate analytical step and not a requirement for ARIMA. Option E: Seasonal components are addressed by SARIMA models, not basic ARIMA.
In the context of time series analysis, the Dickey-Fuller test is used to:
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