Exploiting the volatility potential on the stock market

Abstract

An overview of the ideas about the tools and indicators for measuring the variability, instability, fluctuation in time of stock market prices and their profitability is given (on the example of five socially significant banks), the need for their assessment is justified. It is concluded that in the conditions of the economic crisis, the assessment of the probability of income loss is highly relevant. Risk is the most important factor that should be taken into account when forming a securities portfolio. When selecting assets for a portfolio, an investor is faced with a choice: to what extent is an increase in the risk measure acceptable with an increase in profitability? There is a need for a comparative characteristic of the investment portfolio. One of the ways to reduce the volatility of the portfolio is to change its composition by replacing an asset with high volatility with an asset with low volatility, or better - with a risk-free asset. It is concluded that the β-coefficients are the simplest indicator of the degree of sensitivity of the yield of a stock or a portfolio of shares selected for purchase to the yield of a market portfolio of shares or the yield of a stock selected as a comparison base. The assessment obtained as a result of the application of financial analysis indicators allows the company's management and the investor to solve the problems of strategic choice, allows them to compare alternatives to the investment strategy and make a judgment on the appropriateness of the choice.