What is volatility?

The term volatility means the risk of a certain stock price which can change drastically to the slightest events. Usually small new companies are considered volatile and not the well based blue chip ones. If a share has a high volatility index means that it might change over a large range of values. In more common terms the stock price might change drastically up or down under a low time span. A low volatility means that there will be changes in the stock price but they will be slow and small ones. A good way to measure a stock’s volatility is to use the beta index. For example if a particular stock has a beta of 1.2 that means it has historically moved 120% over every 100% move in the benchmark and if the beta is .8 this means 80% for every 100% move in the underlying index.