Historical Volatility

RECENT NEWS
Reuters  7 hrs ago  Comment 
Investors should expect more calm to return to U.S. equity markets after some of the most volatile trading since 2012 as the 21-day incubation period for Ebola passes for many in Texas without new infections.
MarketWatch  9 hrs ago  Comment 
The pound moves higher against the dollar in Monday’s session as investors buy back currencies that were badly beaten by last week’s volatility.
Yahoo  12 hrs ago  Comment 
As the markets gyrated last week, many investors attempted to make money by trading volatility itself. That's a risky gamble.
TheStreet.com  Oct 20  Comment 
NEW YORK (TheStreet) -- IBM announced premarket Monday that it was dumping a unit of its semiconductor business; an hour later it reported that it missed quarterly earnings. This shocker illustrates why investors should shift from a "buy and...
The Straits Times  Oct 20  Comment 
October 21, 2014 1:25 AM MARKETS across the region rebounded yesterday as investors - still reeling from last week's shelling - took comfort in positive economic data from the US. Strategists from major banks and fund houses are urging punters to...
Forbes  Oct 20  Comment 
What a difference a single month can make. Four weeks ago, a record-high S&P 500 and a CBOE Volatility Index (VIX) languishing at multi-year lows south of 12 dominated our conversation. Risk perceptions remained “subdued” despite notable...
Clusterstock  Oct 20  Comment 
The spike in market volatility and the slide in stock prices have people freaked out we're on the verge of a bear market or perhaps even a crash. Worries include the slowing global economy, falling prices, heightened geopolitical tensions, and...
Yahoo  Oct 20  Comment 
TOKYO (AP) — Asian stock markets shrugged off China's weakest economic growth in five years, finding a silver lining in the fact it didn't slow as much as feared.




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Volatility refers to the tendency of prices to change unexpectedly, usually as a response to new information or changes in demand for the investment. Volatility can be defined as an investment's tendency to move up and down in price over the latest n periods.

A security with high volatility has bigger fluctuations in price compared to a security with low volatility. The more quickly a price changes up and down, the more volatile it is. As such, volatility is often used as a measure of risk.

For example: A stock whose price went up 10% yesterday and went down 25% today is more volatile than a stock which increased 2% in both days.

Historical volatility is calculated by looking at past changes in stock price. The standard deviation of percentage changes in price is used to calculate observed volatility within the considered timeframe.

Historical Volatility, which looks at the past, is distinct from Implied volatility, which represents expectations about future fluctuations in price and is calculated by looking at the prices of options on the underlying investment.

Volatility is also different from Beta, which is a measure of how the stock price reacts to changes in a broad market index, such as the S&P 500.


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