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MEASURING VOLATILITY: The Stock Market Indices

MEASURING VOLATILITY: The Stock Market Indices. In the Stock Market. How do you relate this picture to the stock market?. Volatility: Indicates how much and how quickly the value of an investment, market, or market sector changes.

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MEASURING VOLATILITY: The Stock Market Indices

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  1. MEASURING VOLATILITY:The Stock Market Indices In the Stock Market

  2. How do you relate this picture to the stock market? • Volatility: • Indicates how much and how quickly the value of an investment, market, or market sector changes. • A volatile market - rapid and steep price fluctuations within weeks and days. • A market that is not volatile -less dramatic price movements.

  3. Just like you react differently to straight sections on the rollercoaster than you do to the climbs and drops, investors react differently to low volatility than they do to high volatility. Today we will look at charts to determine the volatility in the markets.

  4. Terms to know • . • High Volatility: Occurs when the price of a security or index changes dramatically over a short time period in either direction. • Index: Reports changes, usually expressed as a percentage, in a specific financial market. Each index measures the market from a specific starting point. Some indexes are: Dow (NYSE), S&P 500 (NYSE), Russell (NASDAQ), etc. • Low Volatility: Means a security's value does not fluctuate dramatically. • Risk: The chance of losing all or part of the value of an investment. • Risk Tolerance: An individual investor’s ability to accept loss of some or all of the money they have invested. An individuals’ Risk Tolerance is based on a number of factors including age, financial stability, amount of time before invested funds are needed for other purposes.

  5. What is your response to high volatility? • On a twisty, up and down section of a roller coaster • As an investor in a volatile stock market? • Investors are nervous and less likely to invest when volatility is high and stock prices are unpredictable

  6. What is an index? • A method of measuring a section of the stock market • The Dow • S&P 500

  7. Analyze the indices and compare your portfolio • http://www.money.msn.com/

  8. What you need to accomplish… • SMG Week III Handout • Research Dow and S&P • Compare your portfolio to Dow and S&P • Measure volatility

  9. The Dow Jones Industrial Index • It is an index that shows how 30 large, publicly owned companies based in the United States have traded during a standard trading session in the stock market • Second oldest US market index • Created by Charles Dow • Editor of Wall Street Journal & co-founder of Dow Jones & Co. • Also called • “Industrial Average” • The Dow Jones, • The Dow 30 • The Dow

  10. The Dow Jones Industrial Index • 3M Company • Alcoa Inc. (AA) • American Express Co. (AXP) • AT&T Inc (T) • Bank of America Corp. (BAC • Boeing Co. (BA) • Caterpillar, Inc. (CAT) • Chevron Corp. (CVX) • Cisco Systems Inc. (CSCO)   • Coca-Cola Co. (KO) • DuPont (E.I.) • deNemours (DD) • Exxon Mobil Corp. (XOM) • General Electric Co. (GE) • Hewlett-Packard Co. (HPQ) • Home Depot, Inc. (HD) • Intel Corp. (INTC) • International Bus. Mach. (IBM) • J.P. Morgan Chase & Co. (JPM) • Johnson & Johnson (JNJ) • Kraft Foods Inc. Cl A (KFT) • McDonalds Corp. (MCD) • Merck & Co. Inc. (MRK) • Microsoft Corp. (MSFT) • Pfizer Inc. (PFE) • Procter & Gamble Co. (PG) • Travelers Cos. Inc (TRV)   • United Technologies Corp. (UTX) • Verizon Communications Inc. (VZ) • Wal-Mart Stores, Inc. (WMT) • Walt Disney Co. (DIS)

  11. Review the indices at Yahoo finance http://www.finance.yahoo.com

  12. Stock Market Indices (Index) • S&P 500 • Dow Jones

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