Fourier Analysis

AAA

DEFINITION of 'Fourier Analysis'

A type of mathematical analysis that attempts to identify patterns or cycles in a time series data set which has already been normalized. By first removing any effects of trends or other complicating factors from the data set, the effects of periodic cycles or patterns can be identified more accurately, leaving the analyst with a good estimate of the direction that the data under analysis will take in the future. Named after the nineteenth-century French mathematician and physicist Joseph Fourier.

INVESTOPEDIA EXPLAINS 'Fourier Analysis'

This type of analysis may sound complex, but it actually makes good sense. For example, suppose a manufacturing company wanted to know what stage of its price cycle its main raw material was in. Because inflation would constantly be increasing the dollar price of the commodity over time, an analyst would remove the effects of inflation from the commodity's historical prices first. Once inflation was controlled for, the analyst would then have a much more accurate picture of the price cycles experienced by the commodity.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Detrend

    In forecasting models, the process of removing the effects of ...
  3. Cyclical Industry

    A type of an industry that is sensitive to the business cycle, ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Forecasting

    The use of historic data to determine the direction of future ...
  6. Econometrics

    The application of statistical and mathematical theories to economics ...
RELATED FAQS
  1. Are all fixed costs considered sunk costs?

    In accounting, finance and economics, all sunk costs are fixed costs. However, not all fixed costs are considered to be sunk. ... Read Full Answer >>
  2. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  3. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
  4. How much variance should an investor have in an indexed fund?

    An investor should have as much variance in an indexed fund as he is comfortable with. Variance is the measure of the spread ... Read Full Answer >>
  5. Can the correlation coefficient be used to measure dependence?

    The correlation coefficient can be used to measure the linear dependence between two random variables. The most common correlation ... Read Full Answer >>
  6. How do you calculate variance in Excel?

    To calculate statistical variance in Microsoft Excel, use the built-in Excel function VAR. Given a set of numbers value1 ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Capitalizing On Seasonal Effects

    We show you how to take advantage of periodic trends in the equity markets.
  2. Active Trading

    Market Cycles: The Key To Maximum Returns

    You need to understand the various phases of the market cycle to avoid bubbles and make the best investments.
  3. Active Trading Fundamentals

    DMI Points The Way To Profits

    The directional movement index tells you whether to go long, short or stand aside.
  4. Fundamental Analysis

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  5. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  6. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  7. Investing

    The Labor Market Recovery’s Missing Ingredient

    Job creation is running at the fastest pace since the 90s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly.
  8. Trading Strategies

    Best Undergraduate Degrees For Day Traders

    We look at some popular undergrad majors for those wanting to begin a career in the exciting world of fast-paced trading.
  9. Fundamental Analysis

    Explaining Standard Error

    Standard error is a statistical term that measures the accuracy with which a sample represents a population.
  10. Economics

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center