MEASURING VOLATILITY: The Stock Market Indices

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MEASURING VOLATILITYThe Stock Market Indices

• In the Stock Market

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How do you relate this picture to the stock
market?

• Volatility
• Indicates how much and how quickly the value of
  an investment, market, or market sector changes.
• A volatile market - rapid and steep price
  fluctuations within weeks and days.
• A market that is not volatile -less dramatic
  price movements.

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• Just like you react differently to straight
  sections on the rollercoaster than you do to the
  climbs and drops, investors react differently to
  low volatility than they do to high volatility.
• Today we will look at charts to determine the
  volatility in the markets.

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Terms to know

• .
• High Volatility Occurs when the price of a
  security or index changes dramatically over a
  short time period in either direction.
• Index Reports changes, usually expressed as a
  percentage, in a specific financial market. Each
  index measures the market from a specific
  starting point. Some indexes are Dow (NYSE), SP
  500 (NYSE), Russell (NASDAQ), etc.
• Low Volatility Means a security's value does not
  fluctuate dramatically.
• Risk The chance of losing all or part of the
  value of an investment.
• Risk Tolerance An individual investors ability
  to accept loss of some or all of the money they
  have invested. An individuals Risk Tolerance is
  based on a number of factors including age,
  financial stability, amount of time before
  invested funds are needed for other purposes.

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What is your response to high volatility?

• On a twisty, up and down section of a roller
  coaster
• As an investor in a volatile stock market?
• Investors are nervous and less likely to invest
  when volatility is high and stock prices are
  unpredictable

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What is an index?

• A method of measuring a section of the stock
  market
• The Dow
• SP 500

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Analyze the indices and compare your portfolio

• http//www.money.msn.com/

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What you need to accomplish

• SMG Week III Handout
• Research Dow and SP
• Compare your portfolio to Dow and SP
• Measure volatility

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The Dow Jones Industrial Index

• It is an index that shows how 30 large, publicly
  owned companies based in the United States have
  traded during a standard trading session in the
  stock market
• Second oldest US market index
• Created by Charles Dow
• Editor of Wall Street Journal co-founder of Dow
  Jones Co.
• Also called
• Industrial Average
• The Dow Jones,
• The Dow 30
• The Dow

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The Dow Jones Industrial Index

• Home Depot, Inc. (HD)
• Intel Corp. (INTC)
• International Bus. Mach. (IBM)
• J.P. Morgan Chase Co. (JPM)
• Johnson Johnson (JNJ)
• Kraft Foods Inc. Cl A (KFT)
• McDonalds Corp. (MCD)
• Merck Co. Inc. (MRK)
• Microsoft Corp. (MSFT)
• Pfizer Inc. (PFE)
• Procter Gamble Co. (PG)
• Travelers Cos. Inc (TRV)  
• United Technologies Corp. (UTX)
• Verizon Communications Inc. (VZ)
• Wal-Mart Stores, Inc. (WMT)
• Walt Disney Co. (DIS)

• 3M Company
• Alcoa Inc. (AA)
• American Express Co. (AXP)
• ATT Inc (T)
• Bank of America Corp. (BAC
• Boeing Co. (BA)
• Caterpillar, Inc. (CAT)
• Chevron Corp. (CVX)
• Cisco Systems Inc. (CSCO)  
• Coca-Cola Co. (KO)
• DuPont (E.I.)
• deNemours (DD)
• Exxon Mobil Corp. (XOM)
• General Electric Co. (GE)
• Hewlett-Packard Co. (HPQ)

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• Review the indices at Yahoo finance
• http//www.finance.yahoo.com

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Stock Market Indices (Index)

• SP 500
• Dow Jones