Does volatility of a stock increases with increase in its price?

Question

a 10% channel will be much wider if the stock trades at $80 than at $10..does that mean volatility increases with increase in price?

Answer 1

Not necessary.....infact it seems the stock becomes less volatile if it's price goes higher....Just an observation...

Answer 2

I am not sure that it does.

Answer 3

yes, it does

Answer 4

No

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Answer 5

Hmmm.  If we use beta as an indication of volatility and do filter on a stock data base based on stock price and beta we should find the answer.

I use Fidelity's data base.

Of stocks selling at less than $10 a share, there are 2574 in the data base and of those 500 have a beta of greater than 2 or 19.4%

Of stocks selling at less than $20 a share, there are 4317 in the data base and of those 650 have a beta of greater than 2 or 15%

Of stocks selling at greater than $50 a share, there are 778 in the data base and of those 36 have a beta of greater than 2 or 4.6%

Of stocks selling at greater than $100 a share, there are 105 in the data base and of those 10 have a beta of greater than 2 or 9.5%.

It rather appears that the less pricy the stock the higher the volatility by a significant amount but it also appears that there is a price range somewhere around $50 perhaps where the volatility is at the minimum.

That sort of begs the question of what price range has the lowest volitility.

It appears to be the price range  from $60 - 70 a share.  Only 3 of 60 stocks in that range or 1.8% have a beta of greater than 2.

Answer 6

If you measure volatility in dollars, volatility usuallly increases as the price increases.

If you measure volatility as a percentage of the price, volatility usually decreases as the price increases.

Option trading is all about volatility. When option traders measure volatility they measure it as a percentage of the price.

Example

The $10 stock may have a volatility of $6, or 60%, while the $80 stock may have a volatility of $16, or 20%. To an options trader the $6 stock has a higher volatility, while if you prepared a graph of the two volatilities (in dollars) on a graph the $80 stock would appear to have a higher volatility.