Fourier Analysis


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.

BREAKING DOWN '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.

  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Business Cycle

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

    In forecasting models, the process of removing the effects of ...
  4. Forecasting

    The use of historic data to determine the direction of future ...
  5. Cyclical Industry

    A type of an industry that is sensitive to the business cycle, ...
  6. Econometrics

    The application of statistical and mathematical theories to economics ...
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. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  5. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  6. Fundamental Analysis

    Emerging Markets: Analyzing Colombia's GDP

    With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy.
  7. Investing

    What is Descriptive Statistics?

    Descriptive statistics is the term applied to meaningful data analysis.
  8. Fundamental Analysis

    Create a Monte Carlo Simulation Using Excel

    How to apply the Monte Carlo Simulation principles to a game of dice using Microsoft Excel.
  9. Fundamental Analysis

    Emerging Markets: Analyzing Chile's GDP

    Chile has become one of the great economic success stories of Latin America.
  10. Mutual Funds & ETFs

    Top 4 Inverse Equities ETFs

    Explore analysis of some of the most popular inverse and leveraged-inverse ETFs that track equity indexes, and learn about the suitability of these ETFs.
  1. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  2. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  3. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  4. What are some of the more common types of regressions investors can use?

    The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >>
  5. What types of assets lower portfolio variance?

    Assets that have a negative correlation with each other reduce portfolio variance. Variance is one measure of the volatility ... Read Full Answer >>
  6. When is it better to use systematic over simple random sampling?

    Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  2. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  3. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  4. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Capitalized Cost

    An expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized Costs are incurred ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!