You are to estimate a stock’s annualized volatility using its prices in the past 5 months....

Question

Question

You are to estimate a stock’s annualized volatility using its prices in the past 5 months.

Find the historical volatility for this stock.

Answer 1

Answer #1

Volatility of stock is the dispersion of stock prices from mean prices. We calcuate volitality using standard deviation.

Standard Deviation = Square Root of (Sum of Square of deviations/ No of observations)

Standard Deviation (monhtly) = Square Root (118 / 5) = 4.8579

Annualised Standard Deviation = Monthly Standard Deviation * Square Root 12

= 16.83

Stocks annualised volatility is 16.83

Answer 2

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