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I am looking at an EMEA liquidity report.

One measure I am interested in is the volatility. The report includes a list of various indexes and the "Average Volatility " for a period of 5 days expressed as a percentage.

I can't make sense of how this is calculated.

I have the underlying figures that allow me to try to calculate this metric, but I can't understand how it was calculated that FTSE100 had an Volatility of 59% between the between the 2nd and 6th of March. 59% percent of what??

Any leads/ideas as to how this metric can be found would be welcome.

Thanks

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Volatility is typically expressed as an annualized standard deviation of periodic movements. so a "59% volatility" most likely means that there's a 68% (1 sd) chance that the index will move 59% (up or down) or less in 1 year (~252 business days). To convert an annual volatility to a daily one, you divide by the square root of 252 (# of trading days in a typical year), so the daily volatility for that period was

59% / sqrt(252) = 3.7%.

That means in that period there was about a 68% chance that the daily change is 3.7% or less (or, that there's a 32% change that the daily change will be more than 3.7%).

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  • Hey, thanks for your answer, instructive. My question is more about how the actual 78% value (was 78, not 59) was actually calculated. For STOXX 600, for the period of time from 2nd and 6th of March, they calculate an 'Avg volatility %' of 78%, I have the opening, closing, high and low prices for that index. How can I arrive at that figure. Doing a simple standard deviation on the days' price doesn't seem to do it. Thanks –
    – whatisit
    Mar 19, 2020 at 13:34
  • What standard deviation do you get? Take the sd of daily returns (% change from previous day) and multiply it by sqrt(252)
    – D Stanley
    Mar 19, 2020 at 13:55
  • For the sake of giving you numbers, the standard deviation of the % change of the stoxx 600 (investing.com/indices/stoxx-600-historical-data) between the 9th and 13th of march is 0.053851. Times sqrt(252) is 0.85 which I guess translates to 85%. The report gives this value as 78%, so there is a bit of discrepency there.
    – whatisit
    Mar 19, 2020 at 14:18

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