Volatility

You may also find information on a stock's volatility in an analyst report, sometimes expressed as a number called the beta — a measure of a stock's relative volatility. To measure beta, the volatility of the stock's benchmark index is set equal to one. Therefore, a stock with a beta lower than one can be expected to fluctuate less than its benchmark index, and a stock with a beta higher than one will fluctuate more.

Volatility risk may play a big part in your investment decisions. For example, you may not want to invest in a highly volatile stock even if the analyst recommends it strongly — or on the other hand, you may be actively seeking out highly volatile stocks in a rising market.

Sam Stovall,
Chief Investment Strategist at Standard & Poor’s

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