Question

hello my dear student in less than on a paragraph discuss of the stock market and individual stocks are more volatile today than in the past

Answer 1

(Q) Discuss if the stock market and individual stocks are more volatile today than in the past.

(Ans) Volatility refers to the frequency and degree with which the price of a security fluctuates. It can drive inexperienced investors to make irrational trading decisions, but savvy investors can profit from it. Volatility in investing refers to up or down movements in the price of a stock, bond, mutual fund, or other security over time. Investment analysts typically measure the volatility of a security through a "beta" value, which compares the fluctuations of a security to those of a benchmark index like the S&P 500. The stock market has become more volatile over the years, according to a new method for measuring its gyrations, and that's making life more of a challenge for investors as they attempt to navigate the ups and downs.The more volatile a security is, the greater the potential it has to lose or gain value in the short term. Markets go through periods of high and low volatility regularly. It’s normal! And higher volatility isn’t necessarily a bad thing. Like so many things, volatility cuts both ways and you generally won’t hear much handwringing when it cuts to the upside. Volatility (both positive and negative) can be measured by the standard deviation of returns. Standard deviation is a measure of how much a statistic deviates from its average. Lower standard deviations mean the results didn’t vary much, and higher ones mean there was more variability. The S&P 500’s annualized standard deviation from 1926 through 2017 was 15.2%. But that includes some outliers and steeply volatile years, which can skew the average. Over that same period, the median standard deviation was 12.5%. So, both 2008 and 2009 were well above the median but with wildly different results. The most volatile year in history was 1932 when the standard deviation was 65.4%.But stocks were down just 8.9% for the year. Not great, but not a tragedy either. All it tells you is monthly returns were wildly variable that year. Some of the most volatile years in history don’t end up hugely up or down. Volatility can be persistent from day to day, week to week or month to month. Despite some of those short-term swings, the annual returns may still end up middling or even near average. Whenever you invest in securities, you undertake risk. One of the main risks of investing is volatility. All securities are subject to price fluctuations, either up or down, that occur on an annual, monthly, or even daily basis. Such fluctuations may stem from the actions of a company, such as the release of a poor-quality product. Other times, they stem from market or economic shifts, governmental decisions, or global events. Generally, an investor has no direct control over the shifts that cause volatility. More importantly, stocks can rise or fall in times of either high or low volatility. There’s no predictive pattern.