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Old 1st May 2013, 09:13 AM
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Quote:
Originally Posted by man4urheart View Post
In that case value will increase with increase in Price of shares.
Yes, that's true, but the inconsistency due to price variation is much less compared to inconsistency due to lumping of volumes of different stocks.

Let me give an example.

Suppose there is a jeweler who deals in ornaments of gold and silver.

On one particular day, he sells gold jewellery weighing 200 grams and silver jewellery weighing 500 grams.

Next day, he sells gold jewellery weighing 300 grams and silver jewellery weighing 200 grams.

Note: the prices of gold and silver were different on both days.

Which day was better for him - the day he sold 700 grams of jewellery or the day he sold 500 grams of jewellery?

Obviously, the second day.

On the first day, his volume (in grams) was higher but majority of volume came from low priced ornaments and thus the day was less profitable for him.

Just like 10 grams of silver is very different from 10 grams of gold, 1 crore shares volume of J.P. Associates is very different from a 1 crore shares volume of Infosys.

Any analysis done by lumping all volume data together has very limited use.
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