What is a Quartile?
A quartile is one of four equal parts.
How Does a Quartile Work?
For example, if we were to look at all of the closing prices for Company XYZ stock for every day in the last year, the top 25% of those prices would represent the upper quartile of the data. The bottom 25% of those prices would represent the lower quartile of the data. There would be two quartiles in between the upper and lower quartiles. The average of all the stock prices typically falls right in the middle, between the second and third quartiles.
Why Does a Quartile Matter?
Quartiles are crucial for studying economic data, income data, stock data and virtually any other kind of financial information. By breaking things into quartiles, an analyst can make a variety of inferences about the data and how the observed item behaves.