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Market Volatility - Composite Indicator using Stocks Standard Deviation

by Tom Huggens, 5064 days ago
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Standard deviation is a well-known measure of volatility of an investment or an asset. The volatility measures the dispersion of a set of data from its mean, it does not tell us about the direction of the market or the asset.
The volatility of a stock is calculated by taking the standard deviation of the one-bar rate of return of that stock.

The Market Volatility Composite returns the ratio of the number of stocks with increasing 10-bar standard deviation to the number of stocks with decreasing 10-bar standard deviation. Above one, the composite indicates that there are more stocks with increasing volatility than stocks with decreasing volatility and this is a sign that the market volatility has increased.

This composite is a short-term volatility indicator because values move above and below the base line (1) several times each month. By updating this market indicator and setting a higher period for the standard deviation function, you can transform this composite into a medium or long-term indicator of market volatility.

It is also possible to reduce the number of oscillations of the composite by smoothing it using a simple or an exponential moving average.

This market volatility composite creates a ticker symbol whose name is _MARKET_STDEV.


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Type: Composite Index

Object ID: 892


Country:
All

Market: Stock Market

Style:
Technical Analysis

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