BZ Bread

by George Schils.

The SP 500 index as a random walk

Saturday, January 26, 2013

This brief blog post gives the results of some random walk studies applied to the stock market. In particular, a segment of S&P 500 stock market data is used for the analysis. The question is how does the stock market data compare to a random walk. To answer this question, the power spectrum is computed for a segment of stock market data. It is known that the power spectrum of a random walk decreases as the square of the frequency. The analysis that we do computes the power spectrum of a section of S&P 500 data, and compares the fall off over frequency with that of a random walk.