Econometrica Vol. 14 No. 4 1946
Constant-Amplitude Scales for Plotting Stock Prices
Abstract
IF the variable X represents the price of an active stock, it is well known that the tendency of X to change is an increasing function of price itself, say f(X). If the tendency to relative change with respect to price were constant, graphs whose amplitude of fluctuation is uncorrelated with price could be constructed by (1) plotting log X on ordinary arithmetic scale or (2) plotting X on semilogarithmic scale. However, the tendency to relative change f(X)/X has been found to be a decreasing function of X and hence any constant-amplitude scale for plotting stock prices must be based on some function other than log X, say F(X), whose derivative is inversely proportional to the tendency to change with respect to price. In other words, the desired function is any solution of the differential equation
- DOI
- 10.2307/1906914
- Volume
- 14
- Issue
- 4
- Pages
- 316
- Sources
- openalex crossref