When investing in the stock market, the term basis point refers to a change in the value of the stock. One basis point always equals 1/100 of 1 percent. Investors and analysts commonly use basis points when discussing the increase or decrease of a stocks price. For example, a stock that increased in value by 25 percent would also increase in value by 25 basis points. You can manually calculate the basis point increase or decrease in value for a stock.
Determine the starting price of the stock. For example, assume the starting price of a stock was $10 per share.
Determine the current price of the stock. For example, assume the current price of the stock is $11 per share.
Divide the current price of the stock by the starting price of the stock. Continuing the same example, 11 / 10 = 1.1.
Subtract 1 from the current price of the stock divided by the starting price of the stock. Continuing the same example, 1.1 - 1 = .1. This figure represents the change in value of the stock expressed as a percent.
Multiply the percentage change in value for the stock by 100. Continuing the same example, .1 x 100 = 10. This figure represents the basis point change in value for the stock. In other words, the stock increased in value by 10 basis points.
- "Principles of Finance"; Scott Besley and Eugene Brigham; 2008
- Math is Fun: Percentage Points
Since 1992 Matt McGew has provided content for on and offline businesses and publications. Previous work has appeared in the "Los Angeles Times," Travelocity and "GQ Magazine." McGew specializes in search engine optimization and has a Master of Arts in journalism from New York University.