Question

Do you believe that stock prices are too volatile? Be sure to explain what you mean when you say “volatility” and “too much.”

Answer 1

Yes, the stock prices are too volatile and that could be reflected through a lot of uncertainity in the stock market and the volatility is represented through the beta, because there is a whole lot of systematic risk which is present in the market and too much volatility will be meaning that the beta of the stock is particularly higher than that of the market.

Volatility in this scenario would mean that the movement of the stock in comparison to that of the market and it would be reflected by the beta of the stock due to systematic risk and uncertainty is in the market

'Too Much' will mean that The beta of the stock is higher than that of the market because the movement in the stock is higher than that of market, so the beta would be comparatively higher than one, and it is called too much volatillity.