Investing Basics

What Is Volatility?

Volatility is the degree to which an asset's price or return moves up and down over time. It is commonly measured by the standard deviation of returns: the larger the swings around the average return, the higher the volatility. Higher volatility means a wider range of possible short-term outcomes.

How It Is Measured

Historical volatility is calculated from past returns; implied volatility is derived from option prices and reflects market expectations.

Example

Two investments can both average 6% a year while one moves between +5% and +7% and the other between −20% and +30%. The second has much higher volatility, even though the average return is the same.

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📉 Standard Deviation Calculator Sample and population standard deviation and variance, with a step table. Calculate → 📈 CAGR Calculator Find your investment's true annualized return. Calculate →

🔗 Related Terms

Standard Deviation Risk Tolerance Diversification Stock Dollar-Cost Averaging

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.