How Volatile Is the Stock Market?


Quick Answer

The volatility of the stock market varies based on a monthly, weekly, or even daily basis. The stock market is volatile any time there is abundant selling of stocks and wide swingsin prices. High volatility, when points go up and down substantially on a day-to-day basis is abnormal, but the stock market itself can be volatile at any given time.

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Full Answer

The stock market can be volatile because fear sometimes motivates investors to pull money out of mutual funds and cause fluctuations. Fear becomes a "self-fulfilling prophecy that makes investors more defensive, which sparks more selling,"according to USA Today.Other times, it is volatile due to a weak economy, especially when the Federal Reserve makes announcements that cause investors to lose trust in the government.

Stock market volatility has only increased due to the use of computers to help traders buy and sell. These computers move quickly, acting on trends rapidly and causing sharp rises and falls. Volatility also increases in the stock market when international banking appears unstable. For example, in 2011, a European downturn spurred concerns of a global recession that in turn inspired domestic volatility.

Volatile stock markets may be a good time to make purchases. "The steep price declines and crazy up-and-down moves offer opportunities to buy stocks cheap," statesUSA Today.

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