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Get Started in Shares by Glen Arnold

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Volatility

Let’s take a closer look at this term ‘volatility’. Warning: this is about to get mathematical – you can skip the detail of the calculations without losing much comprehension of the volatility measures.

Figure 13.2 shows the share prices for two companies over a period of eight weeks. It is obvious from the chart that shares in Bouncy plc are much more volatile than shares in Stable plc. The average price for both shares is £1.

Observing the higher degree of movement in Bouncy’s shares around its average share price is very easy in this case. However, it might be useful to summarise the degree of movement in a number (a ‘statistic’), particularly if we were looking at more subtle cases and could not gauge relative volatility by looking ...

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