The periodogram method divides the signal into a number of shorter (and often overlapped) blocks of data, computes the squared magnitude of the windowed (and usually zero-padded) DFT, X i ω k X i ω k , of each block, and averages them to estimate the power spectral density. The squared magnitudes of the DFTs of LL possibly overlapped length-NN windowed blocks of signal (each probably with zero-padding) are averaged to estimate the power spectral density: X ω k ̂=1L∑i=1L| X i ω k |2 X ω k 1 L i L 1 X i ω k 2 For a fixed total number of samples, this introduces a tradeoff: Larger individual data blocks provides better frequency resolution due to the use of a longer window, but it means there are less blocks to average, so the estimate has higher variance and appears more noisy. The best tradeoff depends on the application. Overlapping blocks by a factor of two to four increases the number of averages and reduces the variance, but since the same data is being reused, still more overlapping does not further reduce the variance. As with any window-based spectrum estimation procedure, the window function introduces broadening and sidelobes into the power spectrum estimate. That is, the periodogram produces an estimate of the windowed spectrum Xω ̂=E|Xω* W M |2 X ω X ω W M 2 , not of E|Xω|2 X ω 2 .

The averaging necessary to estimate a power spectral density can be performed in the discrete-time domain, rather than in frequency, using the auto-correlation method. The squared magnitude of the frequency response, from the DTFT multiplication and conjugation properties, corresponds in the discrete-time domain to the signal convolved with the time-reverse of itself, |Xω|2=Xω X * ω↔xn x * -n=rn ↔ X ω 2 X ω X * ω x n x * n r n or its auto-correlation rn=∑xk x * n+k r n k x k x * n k We can thus compute the squared magnitude of the spectrum of a signal by computing the DFT of its auto-correlation. For stochastic signals, the power spectral density is an expectation, or average, and by linearity of expectation can be found by transforming the average of the auto-correlation. For a finite block of NN signal samples, the average of the autocorrelation values, rn r n , is rn=1N-n∑k=0N-1-nxk x * n+k r n 1 N n k N 1 n 0 x k x * n k Note that with increasing lag, nn, fewer values are averaged, so they introduce more noise into the estimated power spectrum. By windowing the auto-correlation before transforming it to the frequency domain, a less noisy power spectrum is obtained, at the expense of less resolution. The multiplication property of the DTFT shows that the windowing smooths the resulting power spectrum via convolution with the DTFT of the window: Xω ̂=∑n=-MMrnwnⅇ-ⅈωn=E|Xω|2*Wω X ω n M M r n w n ω n X ω 2 W ω This yields another important interpretation of how the auto-correlation method works: it estimates the power spectral density by averaging the power spectrum over nearby frequencies, through convolution with the window function's transform, to reduce variance. Just as with the periodogram approach, there is always a variance vs. resolution tradeoff. The periodogram and the auto-correlation method give similar results for a similar amount of averaging; the user should simply note that in the periodogram case, the window introduces smoothing of the spectrum via frequency convolution before squaring the magnitude, whereas the periodogram convolves the squared magnitude with Wω W ω .