A historical analysis of the US stock price index using empirical mode decomposition over 1791-2015

Aviral Tiwari, Arif Dar, Niyati Bhanja () and Rangan Gupta

No 2016-9, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper, the dynamics of Standard and Poor's 500 (S&P 500) stock price index is analysed within a time-frequency framework over a monthly period 1791:08-2015:05. Using the Empirical Mode Decomposition technique, the S&P 500 stock price index is divided into different frequencies known as intrinsic mode functions (IMFs) and one residual. The IMFs and the residual are then reconstructed into high frequency, low frequency and trend components using the hierarchical clustering method. Using different measures, it is shown that the low frequency and trend components of stock prices are relatively important drivers of the S&P 500 index. These results are also robust across various subsamples identified based on structural break tests. Therefore, US stock prices have been driven mostly by fundamental laws rooted in economic growth and longterm returns on investment.

Keywords: Empirical Mode Decomposition; stock prices; S&P 500 Index; United States (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.economics-ejournal.org/economics/discussionpapers/2016-9
https://www.econstor.eu/bitstream/10419/128503/1/848390229.pdf (application/pdf)

Related works:
Journal Article: A historical analysis of the US stock price index using empirical mode decomposition over 1791-2015 (2016)
Working Paper: A Historical Analysis of the US Stock Price Index using Empirical Mode Decomposition over 1791-2015 (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:20169

Access Statistics for this paper

More papers in Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().