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Signal analysis of global financial crises using Fourier series

Author

Listed:
  • Jun, Doobae
  • Ahn, Changmo
  • Kim, Jinsu
  • Kim, Gwangil

Abstract

In this paper, we analyze the annual signals generated by the US stock market, using the returns of US monthly stock-indices. To this end, we transform the signals into a Fourier series and deduce financial information from the amplitude and phase of each component of the Fourier series. We show that, as global financial crises approach, low-frequency components increase more sharply than high frequency components. We also show that they react selectively to specific financial crises, under four major modes, and generate sharp peaks, showing their own characteristics of monthly propagation. By comparing these results with the same type of analyses for the UK and German stock markets, we demonstrate that this method works well for detecting global financial crises. Further, we apply this method to recent US stock-indices, and find that remarkable signals are being generated, suggesting that the current status is unstable. In other words, a financial crisis may be approaching.

Suggested Citation

  • Jun, Doobae & Ahn, Changmo & Kim, Jinsu & Kim, Gwangil, 2019. "Signal analysis of global financial crises using Fourier series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 526(C).
    • Handle: RePEc:eee:phsmap:v:526:y:2019:i:c:s0378437119306259
    DOI: 10.1016/j.physa.2019.04.251
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    Citations

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    Cited by:

    1. Gerardo Estrada Sánchez & Federico Hernández Álvarez & Andrés Giovanni Camacho Ardila, 2023. "Detección de periodos de crisis del NASDAQ con EEMD -AE," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 18(1), pages 1-26, Enero - M.
    2. Vera Ivanyuk, 2021. "Modeling of Crisis Processes in the Financial Market," Economies, MDPI, vol. 9(4), pages 1-17, October.
    3. Luo, Changqing & Liu, Lan & Wang, Da, 2021. "Multiscale financial risk contagion between international stock markets: Evidence from EMD-Copula-CoVaR analysis," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    4. Yang Liu & Qingguo Zeng & Bobo Li & Lili Ma & Joaquín Ordieres‐Meré, 2022. "Anticipating financial distress of high‐tech startups in the European Union: A machine learning approach for imbalanced samples," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 41(6), pages 1131-1155, September.

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