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Rate Of Change

What is 'Rate Of Change'

The rate of change (ROC) is the speed at which a variable changes over a specific period of time. ROC is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another; graphically, the rate of change is represented by the slope of a line. The ROC is often illustrated by the Greek letter delta.

Explaining 'Rate Of Change'

ROC is used to mathematically describe the percentage change in value over a defined period of time, and it represents the momentum of a variable. The calculation for ROC is simple in that it takes the current value of a stock or index and divides it by the value from an earlier period. Subtract one and multiply the resulting number by 100 to give it a percentage representation.

The Importance of Measuring ROC

ROC is an extremely important financial concept because it allows investors to spot security momentum and other trends. For example, a security with high momentum, or one that has a positive ROC, normally outperforms the market in the short term. Conversely, a security that has a ROC that falls below its moving average or one that has a low or negative ROC is likely to decline in value and can be seen as a sell signal to investors.

Rate of Change and its Relationship With Price

The ROC is most often used to measure the change in a security's price over time. This is also known as the price rate of change. The price rate of change can be derived by taking the price of a security at time B minus the price of the same security at time A and dividing that result by the price at time A.


Further Reading


Solving fuzzy equations in economics and finance
www.sciencedirect.com [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …

Does financial development 'lead'economic growth? A vector auto-regression appraisalDoes financial development 'lead'economic growth? A vector auto-regression appraisal
www.tandfonline.com [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …

Stock prices and the effective exchange rate of the dollarStock prices and the effective exchange rate of the dollar
www.tandfonline.com [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …

Effect of exchange rate volatility on the Ghana stock exchangeEffect of exchange rate volatility on the Ghana stock exchange
papers.ssrn.com [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …

The behavioural economics of climate changeThe behavioural economics of climate change
academic.oup.com [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …

An empirical comparison of published replication research in accounting, economics, finance, management, and marketingAn empirical comparison of published replication research in accounting, economics, finance, management, and marketing
www.sciencedirect.com [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …

The economics of exchange ratesThe economics of exchange rates
www.jstor.org [PDF]
… Page 5. JJ Buckley / Fuzzy equations in economics and finance 293 Then [11 … We will assume there are two factors influencing the rate of change of price. First, prices change as a result of inflation which we will model as F(t), some function of time …


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