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A measure of risk based on the standard deviation of the asset return. Volatility is a variable that appears in option pricing formulas, where it denotes the volatility of the underlying asset return from now to the expiration of the option. There are volatility indexes. Such as a scale of 1-9; a higher rating means higher risk.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


A measure of a security's stability. It is calculated as the standard deviation from a certain continuously compounded return over a given period of time. It is an important measure in quantifying risk; for example, a security with a volatility of 50% is considered very high risk because it has the potential to increase or decrease up to half its value. Volatility may influence the type of investments one makes: one may directly invest in non-volatile securities, such as a certificate of deposit, but highly volatile securities lend themselves more to short selling and other forms of hedging.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


The term volatility indicates how much and how quickly the value of an investment, market, or market sector changes.

For example, because the stock prices of small, newer companies tend to rise and fall more sharply over short periods of time than stock of established, blue-chip companies, small caps are described as more volatile.

The volatility of a stock relative to the overall market is known as its beta, and the volatility triggered by internal factors, regardless of the market, is known as a stock's alpha.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
They observed that the volatility exertion of the exchange rate on gold is significant.
(2013), assess the relationship between stock indices, gold, and exchange rate in the context of volatility spillovers.
News about policy matters is an important and growing contributor to volatility. The researchers find that 35 percent of EMV articles refer to fiscal policy, mostly taxes, 30 percent discuss monetary policy, 25 percent refer to one or more forms of regulation, and 13 percent mention national security.
Press reports on contributors to market volatility have long emphasized news about GDP, inflation, and other economic aggregates, but news about policy has become increasingly important.
Mark Haefele, chief investment officer of UBS Global Wealth Management, said: "We're monitoring trade negotiations and continue to expect market volatility, but on balance we think the economic outlook is positive and supports our tactical overweight to global equities.
In this paper, we do our own REER calculations then employ both a 12 month moving standard deviation of the exchange rate series and GARCH family models to capture the volatility of the exchange rate series in Egypt during our sample period.
Fountas & Bredin (1998) use a sample of quarterly data that span from 1979:Q2 to 1993:Q3 on the economy of Ireland to estimate short-run and long-run relationship between Ireland's real exports to the UK and exchange rate volatility measured by the moving standard deviation of the growth rate of Irish exchange rate.
Therefore, this study seeks to investigate the nature of the relationship between daily stock returns and conditional volatility in the Nigerian stock market from 1999 to 2016.
In finance, volatility is the degree of variation of a trading price series over time as measured by the standard deviation of returns.
The pertinent financial literature on the relationship between macroeconomic factors and stock return volatility is not very mature and symmetric around both developed and emerging markets (Mamtha & Srinivasan, 2016).
They explored the behavior of volatility in a group of 20 emerging markets (including Pakistan) and tried to achieve three objectives; first, to characterize volatility in emerging economies and presented a number of volatility models.
In Section 2, we describe our numerical algorithm for constructing the time-dependent volatility function.