What Is Volatility in Stocks?
Memory hook: volatility is the waviness, not the direction.
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1.What does volatility tell you?
Memory hook: volatility is the waviness, not the direction.
2.Leo's path is +5, +4, +6, +5 and Marge's is +25, -15, +20, -10 percent. How do their averages compare?
Same average, very different ride.
3.Which finance measure is used to put a number on volatility in the example?
Leo's typical distance is about 0.7 points and Marge's about 17.7 points, roughly 25 times as wide.
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Sources (6)
- Principles of Finance, 15.1 Risk and Return to an Individual Asset (OpenStax)
- Cboe Global Markets: VIX Index (Produktseite)
- ECB Financial Stability Review May 2023, Special Feature: Gauging the interplay between market liquidity and funding liquidity
- Brown, Imai, Vieider, Camerer (2024): Meta-Analysis of Empirical Estimates of Loss Aversion, Journal of Economic Literature 62(2), 485-516
- BIS Papers No 29: The recent behaviour of financial market volatility
- Eigene Rechnung: zwei Preiswege (Leo = Landstrasse, Marge = Welle)
Education only. Not financial advice.