This chart shows Volatility for Marshall & Ilsley Corporation, defined to be the price range as a portion of the average price:
For instance, on 2/4/2011 the average price was 7.25 with a range of 0.08, indicating a Daily Volatility of 1.1%. 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.
For reference, the price is plotted in red. 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 21 years, the Average Quarterly Volatility of MI stock price has been 24% while the Average Daily Volatility has been 3%.
|
