how and why stock market volatility occurs?

Expert Solution

Volatility is a statistical method of measuring dispersion of returns of security over a period of time. Higher the volatility of a security, higher is the risk but also the probability of high returns increases. The volatility in the market occurs mainly through the significant upward or downward movement in price of the security. For example during the earning announcement time period of the companies, the volatility is high because of higher trading activity. It causes significant upward or downward movement in very short period, even within minutes.

The stock market volatility can occur for varied reasons be it the overall economic scenario, the government policy which is ging to impact the company or a particular industry,earning announcement seasons, any positive or negative news about the security and many other reasons which can directly or indirectly Impact the company. Sometimes the volatility is also blamed on the Intra-day traders who try to capture the small movements and benefits from them even for one minute. Volatility can arise from a number of reasons which can directly or Indirectly Impact the company future growth or profitability.

jeff jeffy answered 8 months ago

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