A stock on a stock market always has some measure of volatility which is a function of how much the stock's price changes over an hour, day, week, or some other period. Some stocks are not very volatile at all, remaining fairly steady in price going up or down despite famine, pestilence, war, and war reparations. Others can be very volatile, rapidly changing in price from one hour to the next, seemingly incoherent.

A stock's volatility can also be considered a vote of confidence in the stock, the company issuing the stock, and even its managers. For example, if a company's stock is beleived to be properly priced, its volatility will be low as investors aren't willing to over-value or under-value it even if the company has recently issued a poor earnings report, or its CEO has been caught fondling the hired help. In other cases, a poor earnings report or a potential lawsuit may affect the stock price significantly. Such volatility indicates a lack of confidence in the stock price, and a lack of confidence that the company and/or its managers can effectively navigate the troubles.

Volatility is often considered a Good Thing for day traders and automatic trading systems which rely on the fluctuation to take advantage of the swings in price.

Vol"a*tile*ness, Vol`a*til"i*ty (?), n. [Cf. F. volatilit'e.]

Quality or state of being volatile; disposition to evaporate; changeableness; fickleness.

Syn. -- See Levity.

 

© Webster 1913.

Log in or registerto write something here or to contact authors.