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1 January 1995 Financial Analysts Journal Volume 51, Issue 1

Relative Velocity Statistics: Their Application in Portfolio Analysis

  1. H. M. Gartley

In addition to the usual valuation methods applied to a stock, analysts should consider its velocity. The velocity statistic is a technical factor in the stock's price volatility that measures the percentage rise and fall of a stock price against an average—preferably the industry group. The measure is reliable for certain groups of stocks, so the analyst needs to know the stock's velocity record. Portfolio velocity also can be measured, and surprising results may be obtained by measuring the percentage of market value of a stock (weighted to reflect its velocity) relative to the whole portfolio (weighted to reflect its velocity). Analysts must keep in mind the limitations of the velocity measure, however, in projecting the future.

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