Calculating volatility measure from price movement alone

[heech]

"Volatility estimator" is the right term to be googling. There isn't a simple way to even define the term volatility, although usually we use it as being equivalent to the standard deviation for a log-normal distribution.

What *you* mean by the term "volatility" is really up to you.

 

[ddude]

Thats not BS thats R 8^)

To be more terse:

> # load a nice quant library...
> require(quantmod)
> # get the daily data from yahoo for a year back...
> # do the close-to-close volatility calculation...
> # display the end of the time series of volatility...
> tail(volatility(getSymbols('aapl', auto.assign=FALSE), calc="close"))
[,1]
2011-05-16 0.1466364
2011-05-17 0.1636225
2011-05-18 0.1759760
2011-05-19 0.1771079
2011-05-20 0.1881051
2011-05-23 0.1859659
>

Hmmm... Four comments and two lines of code... And NO BS ;^)

Cordially,

-Digital Dude-

 

[logic_man]

Quote from trading1:

I don't think this has to be complex, simply get the % change in the time periods and get the standard deviation of it as a proportion of the stock value. Try it, it gives a very commonsense result. Other versions might include skew but are not necessarily better for this.

It never ceases to amaze how traders (baffle with BS) turn a simple issue into a complex one.

I have ended up going this route, more or less. I agree that things don't need to be overly complicated, just complicated enough to matter.