What is velocity stocks?

Answer 1

This question is a matter of the relativity of the investor's perspective. What is Velocity in physics? Delta(x) (the displacement) over Delta(t) (the time elapsed). If you are a home bound day trader then you may view the change in the stock price as its displacement, relative to the the change in time. However if you are a capital asset manager or equity trader you will assume the most realistic (pessimistic) view. Time here is subjective; do you watch the change in the stock price per second? per hour? per day? You might chart this change in price to time as Y= Price($) and X=x(t). This is interesting because it gives you a purely quantitative approach to the cahnges in the nominal stock properties and may allow you to react more effeciently in times of accumulating crises.

The definition that most professionals use is the P/E ratio, Price to earnings. In other words when the talking heads on the television tell you that a stock is trading at three times earnings this means that the current stock price is 3x (multipled by three) to most recent reported balance sheet record of earnings per share (can refer to both to undiluted and diluted earnings per share; depending upon the analyst) or the current market price divided by earnings per share. Market price is also a very subjective reference, because an original market price could refer to the discounted value (the real value of the stock after applying the dividend discount model), or the market price by the book value of the stock.