volatility
vol-uh-TIL-uh-tee
/ˌvɒl.əˈtɪl.ə.ti/
Liability to change rapidly and unpredictably; a statistical measure of price variance in financial markets.
Focuses on the intensity, speed, and unpredictability of sudden swings in value.
The story behind the word. In ancient Latin, volatilis meant anything with wings, like birds or arrows. Early chemists used 'volatile' to describe liquids like alcohol that flew up into gas and evaporated instantly into the air. Wall Street later adopted the word for stock prices that jump or crash as fast as a bird taking flight.
Word relationships
- instability: 'Instability' means liable to collapse, while 'volatility' specifically describes rapid, violent swings back and forth.
- capriciousness: 'Capriciousness' implies personal whim, whereas 'volatility' is an objective measure of market price swings.
- stability: The state of being firm, steady, and resistant to sudden changes.
- predictability: The quality of behaving in a consistent, expected manner.
Commonly confused with
- fluctuation: 'Fluctuation' is the simple act of moving up and down, while 'volatility' measures how extreme, fast, and risky those swings are.
Word family
- volatile (adjective): Liable to change rapidly and unpredictably.
- volatize (verb): To cause to evaporate or disperse quickly.
Collocations
- market volatility
- high volatility
- volatility index
- price volatility
Example sentences
- "Geopolitical tensions in energy-producing regions sparked intense volatility in global oil markets." Energy market analysis (Wall Street Journal)
- "The investor diversified her portfolio into government bonds to shelter her savings from equity market volatility." Portfolio risk management
Memory hook
VOLATILE market prices VOLLEY up and down rapidly like a bird taking flight (volare). Taking flight with wild, unpredictable jumps.
When not to use
Avoid using for predictable, scheduled changes; volatility requires erratic, unstable swings.
Fun facts
- 'Volatile' literally meant 'having wings' in Latin before chemists used it for rapidly evaporating liquids.
Related words
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