Volatility

Volatility is a statistical calculation to quantify the level of distribution in Stock Prices around the Mean value. A Stock with a tendency to change quickly and unpredictably is deemed as a riskier Stock.

In Stocks, Volatility is expressed as a percent referenced to a specific time period, Annual Volatility or Average Annualised Volatility over the past X number of years. Volatility is also calculated for shorter periods of time, daily Volatility and this short-term level of Volatility is keenly watched by Equity Investors. Increasing Volatility often signals price movements to the downside as indiscriminate selling commences. But not always, unexpected, good news can also lead to a jump in the Stock Price. Volatility is a statistical calculation to quantify the level of distribution in Stock Prices around the Mean value. The level of Volatility is important as a Stock with a higher level of Volatility is deemed as a riskier Stock. Volatility is one variable for the calculation of Derivative Contracts such as Options.