Volatility

Definition:

Volatility is a mathematical measure of risk in finance. It is a measure of how much returns move, up and down, around their long-term average. Typically, the higher the volatility, the riskier the investment.

Example:

Higher growth stocks often have higher returns than value stocks, but they also have higher volatility.

More Information:

Volatility is a statistical measure. It measures the standard deviation of an investment’s daily returns. To annualized the daily volatility, multiply by the square root of 252, the number of trading days in a year.