DEFINITION of 'Base Period'

A base period is a point in time for which data is gathered and used as a benchmark against which economic data from other periods. Base periods are often used in finance and economics applications, such as measuring inflation or other variables subject to change based on the passage of time.

Also referred to as "reference period."

BREAKING DOWN 'Base Period'

The base period can be thought of as a yardstick for economic data. For example, if a price index has a base year of 1990, current prices are being compared to prices in that time period. When used like this, the base period offers a method to measure changes in price by controlling for the inflation variable. Practitioners can then spot changes in price levels which are not driven by fluctuations in inflation.

As more financial methods use big data and data science applications, base periods for time series analysis grows as an ever more prominent feature of research methodologies.

The use of a base period is not constrained to financial applications. Many natural sciences also regularly use a base period as part of their analytical processes. For instance, to measure changes in global climate patterns, base years must be established.

RELATED TERMS
  1. Base Year

    A base year is the first of a series of years in an economic ...
  2. Time Series

    A time series is a sequence of numerical data points in successive ...
  3. Change

    For an options or futures contract, change is the difference ...
  4. Accounting Period

    An accounting period is an established range of time during which ...
  5. Holding Period

    A holding period is the amount of time an investment is held ...
  6. Data Science

    Data science is a field of Big Data that seeks to provide meaningful ...
Related Articles
  1. Investing

    Stock and Flow Variables Explained: A Closer Look at Apple

    The difference between stock and flow variables is an essential concept in finance and economics. We illustrate with financial statements from Apple Inc.
  2. Insights

    A Primer On Inflation

    Inflation has a negative connotation, but is it all bad or does it offer some tangible benefits?
  3. Investing

    Timeless Ways To Protect Yourself From Inflation

    Inflation is a natural part of modern life, but there are some time-tested ways to inflation-proof your assets.
  4. Trading

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  5. Insights

    How Inflation Affects Your Net Worth

    When calculating your net worth, don't forget to take inflation into account.
  6. Insights

    How Inflation Rates Impact Your Retirement Savings

    Understanding the risks and likely rate of inflation can help investors craft a strategically, well-diversified retirement portfolio.
  7. Financial Advisor

    How Do Companies Forecast Oil Prices?

    Read about the different forecasting methods that businesses use to predict future crude oil prices, and why it's so difficult to guess correctly.
  8. Managing Wealth

    Variable Annuities: The Pros and Cons

    Variable annuities are one of the most complicated financial instruments—weighing the pros and cons.
  9. Investing

    Shield Your Portfolio From Inflation For Real Returns

    Inflation-protected securities are part of the equation, but they're not a perfect solution.
RELATED FAQS
  1. Is economics a science?

    Learn how economics fits into the category of social sciences, and discover the arguments critics make against this classification. Read Answer >>
  2. What is the difference between direct costs and variable costs?

    Learn about variable costs and direct costs, how direct costs and variable costs are classified and the differences between ... Read Answer >>
  3. What is the most important type of data used in business analytics?

    Consider what makes data useful in business analytics, and why companies should search for the types of data that provide ... Read Answer >>
Hot Definitions
  1. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  2. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  3. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  4. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
Trading Center