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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Volatility

Definition:

Beta. Ups vs. downs. If the market moves 2% and your stock moves 4% on average, it's beta is 2, roughly.

Example

Here's a volatile stock chart. And here's one that's (relatively) a dead man's pulse.

Why the diff? Well, people don't really have any clue as to how Netflix makes real money long term. There are dreams, plans, hopes, wishes—but no proven track record of regular free cash. The company doesn't pay a dividend and it has monster competitors looming in the form of Hulu, YouTube, the studios (who it buys from) and others.

But what about GM? Well, GM is a slowly dying-ish company. In fact, were it not for a very Left-leaning President in the office at the time, GM would no longer exist as it would have gone bankrupt in the 2008/9 financial crisis.

GM isn't going gangbusters, but it won't die next year either; it has relatively steady (albeit scant) earnings, and it pays a dividend. A nice one, in fact, which keeps its stock price relatively stable.

For a better encapsulation of volatility, we suggest Real Housewives (really any city)—tune to the parts where the housewives are off their meds. That's volatility.

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