Has anyone made a Fourier transform of a stock price graph?
Would it be useful?
What is Fourier transform?
It is a mathematical operation, now performed easily using a computer, FFT, that converts time domain to frequency domain.
Stock prices are in time domain, as the x axis is time. The Fourier transform of this is price with respect to (the x axis now being) frequency. Equivalent information.
Peaks at high frequency for example would mean that the particular stock has a tendency to vary very quickly.
A better way to understand is in music.
A music signal is vibrations. We can readily feel these if we touch our laryng while singing. Low notes have a low frequency. High notes have a high frequency. If we look at the vibration as amplitude displacement with respect to time it looks like any quickly varying graph.
The Fourier transform of this is what notes are being played. What we might see watching a spectrum analyzer while singing.
Like the keyboard of a piano, left notes are vibrating at lower frequency than the next note on the right.
This is frequency domain.
Reference:
Waves - Berkley Physics Course
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