Stationarity
Quantitative Finance glossary · Market Microstructure & Statistical Arbitrage
Definition
The property that a time series has a stable mean, variance, and lag-dependent covariance structure over time.
Stationarity in plain English
A time series is just data recorded over time — daily temperatures, monthly sales, a stock's returns. That series is 'stationary' when its basic personality stays steady: its typical level (mean), how much it wobbles (variance), and how today relates to yesterday don't drift or change as the calendar rolls forward. Picture a steady heartbeat versus a runaway heartbeat that keeps speeding up — the steady one is stationary, and its future looks statistically like its past. This matters enormously because most forecasting math only works when the past is a reliable guide, which requires the rules of the game to hold still.
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