What is Volatility?

Volatility is a statistical measure of the tendency of a market or security to rise or fall sharply within a short period of time. Volatility is typically measured by the standard deviation of the return of an investment. Standard deviation is a statistical concept that denotes the amount of variation or deviation that might be expected. For example, the S&P 500 has a standard deviation of about 15%, while a guaranteed investment, such as a bank account, has a standard deviation of zero because the return never varies.