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Investigating the efficient markethypothesis using Fourier analysis

Fang, David LU (2019) NEKH02 20191
Department of Economics
Abstract
This study examines if the Swedish stock market adheres to the weak form efficient market hypothesis using Fourier analysis on past stock prices to identify possible cyclic returns. Fourier analysis is well suited for finding seasonalities which would violate the weak-form efficiency. 10 firms were randomly selected from stock market index OMX30 to represent the Swedish stock market.


All firms investigated showed signs of periodic behaviour in the long term but adhered to the weak form efficiency in the short term. Some of the cycles found supports some already known calendar effects, such as the U.S presidential election cycle, January effect and ''Sell in May'' strategy. However, the transforms were of poor resolution due to short... (More)
This study examines if the Swedish stock market adheres to the weak form efficient market hypothesis using Fourier analysis on past stock prices to identify possible cyclic returns. Fourier analysis is well suited for finding seasonalities which would violate the weak-form efficiency. 10 firms were randomly selected from stock market index OMX30 to represent the Swedish stock market.


All firms investigated showed signs of periodic behaviour in the long term but adhered to the weak form efficiency in the short term. Some of the cycles found supports some already known calendar effects, such as the U.S presidential election cycle, January effect and ''Sell in May'' strategy. However, the transforms were of poor resolution due to short data sets, making it difficult to differentiate potential cycles from white noise. In addition, this paper does not account for risk and assumes that all price mechanism are accurate. (Less)
Please use this url to cite or link to this publication:
author
Fang, David LU
supervisor
organization
course
NEKH02 20191
year
type
M2 - Bachelor Degree
subject
keywords
Efficient Markets, Calendar effects, Seasonalities, Fourier analysis, Spectral analysis
language
English
id
8974064
date added to LUP
2019-04-29 13:44:16
date last changed
2019-04-29 13:44:16
@misc{8974064,
  abstract     = {{This study examines if the Swedish stock market adheres to the weak form efficient market hypothesis using Fourier analysis on past stock prices to identify possible cyclic returns. Fourier analysis is well suited for finding seasonalities which would violate the weak-form efficiency. 10 firms were randomly selected from stock market index OMX30 to represent the Swedish stock market. 


All firms investigated showed signs of periodic behaviour in the long term but adhered to the weak form efficiency in the short term. Some of the cycles found supports some already known calendar effects, such as the U.S presidential election cycle, January effect and ''Sell in May'' strategy. However, the transforms were of poor resolution due to short data sets, making it difficult to differentiate potential cycles from white noise. In addition, this paper does not account for risk and assumes that all price mechanism are accurate.}},
  author       = {{Fang, David}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Investigating the efficient markethypothesis using Fourier analysis}},
  year         = {{2019}},
}