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Dow Industrials Historical Volatility

Chapter II: Risks associated with short and long period price changes can be understood through Volatility Analysis. Here the impact of the Volatility Curve on the potential profitability positions across different time spans is shown.

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Daily Volatility = Price Range as a percent of the daily average price. of Dow Industrials

This chart shows Volatility for Dow Industrials, defined to be the price range as a portion of the average price:

For instance, on 3/3/2010 the average price was 10427.9 with a range of 136.64, indicating a Daily Volatility of 1.3%. The Daily Volatility is obtained by dividing the daily range by the daily average. A longer Volatility period such as Weekly Volatility is obtained by dividing the weekly price range by the weekly mean price. It is important to avoid confusing this with the weekly average of the daily volatility, which is a completely different concept.

The red plot shows the actual price. Volatility, as measured through various intervals, ( Daily, Weekly, Monthly and Quarterly) is plotted according to color.

Investors often make a distinction between the concept of Volatility, and the concept of Risk. Academics define them to be exactly equivalent, but as can be seen here, there is good reason to distinguish between the levels of volatility or risk experienced across different time frames. During 30 years, the Average Quarterly Volatility of DJIA stock price has been 13% while the Average Daily Volatility has been 2%.



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Volatility Curve of Dow Industrials

If you have ever seen a "yield curve" you should be able to understand the concept behind this "yield curve". Each Volatility Curve is a snapshot in time. From left to right, each position plots the Volatility associated with increasing intervals of time. However, as seen in this plot of the DJIA Volatility Curve, the increase is not constant.



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Daily Volatility Histogram of Dow Industrials

This histogram is a frequency distribution of Daily Volatility, corresponding to the green points on the first chart on this page.



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Quarterly Volatility Histogram of Dow Industrials

In a similar vein, the Frequency Distribution of the Quarterly Volatility is plotted here. This is the distribution of the values plotted in purple on the top chart from this page.

For Subscribers: Refined Analysis of Dow Industrials Volatility and Risk Behavior

Refined Volatility Risk Analysis for DJIA :


Companies in the News:

In the news, Friday, March 12, 2010: An unfavorable condition has developed with Convergys Corporation, ticker symbol CVG. Also, there are breaking events concerning ConAgra Foods, Inc. (CAG) and Pre-Paid Legal (PPD)

More DJIA Technical Analysis Topics

DJIA Price Predictions

Support and Resistance Levels

Politics and Prices of DJIA

Japanese Candlestick Analysis

Momentum Investing Indicators

DJIA Classical Analysis of Time Series

DJIA Historical Volume

DJIA Seasonal Trends

Back to DJIA Table of Contents


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