Disparity Index
Categories: Financial Theory, Econ, Metrics
If you didn’t already know, a “disparity” is kind of just a fancy way for saying “the difference between point A and point B.” A disparity index is a technical indicator for an asset, where point A is its last closing price and point B is some predetermined moving average.
The disparity index is the difference expressed as a percentage. A positive percentage means that the asset is gaining upward momentum, while a negative percentage means the asset is taking a nosedive.
Investors use indexes like the disparity index to try to get an early glimpse into an asset’s change in trend so that they can make decisions accordingly, and make some money buying or selling the assets they’re watching. If you’re this kind of investor, you no doubt sleep with one eye open...and one eye on the disparity index. Like a dolphin. It’s fine.
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