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Fourier analysis applied to crude oil futures

In order to find seasonality, we first applied Fourier analysis (FFT) to the time series, expecting to simply uncover a degree of periodicity in the price of the futures. However, no semblance of periodicity was found. A plot of the Fourier coefficients in the complex plane gives a simple view of the results, which are highly inconclusive as the "frequencies" are centered around zero and are highly non-specific.

On further research, it became evident that in non-linear time series, linear analysis (i.e. traditional Fourier analysis) is not a valid approach. This is because simple Fourier analysis does not account for trends, drift, abrupt changes, and beginnings and ends of events, all of which are incredibly important parts of signals.

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Fourier Coefficients

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Source:  OpenStax, Wavelet analysis of crude oil futures. OpenStax CNX. Dec 19, 2011 Download for free at http://cnx.org/content/col11397/1.1
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