What is Volatility?
A statistical measure of the dispersion of returns for an asset or market index, often representing its price fluctuation risk.
Volatility refers to the degree of variation in an asset's price over time, measured statistically by metrics like standard deviation. High volatility means the asset's price experiences large swings (both up and down) in a short period, while low volatility indicates more stable, predictable price movements. It is a common proxy for risk.
Investors often associate high volatility with greater uncertainty and potential for both higher gains and larger losses. Growth stocks and cryptocurrencies like Bitcoin are known for high volatility. In contrast, utility stocks or government bonds typically exhibit lower volatility. The VIX index, often called the 'fear gauge,' measures expected volatility in the S&P 500.
Which of the following assets is typically considered the MOST volatile?