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  • The term volatility indicates how much and how quickly the value of an investment, market, or market sector changes.

    For example, because the stock prices of small, newer companies tend to rise and fall more sharply over short periods of time than stock of established, blue-chip companies, small caps are described as more volatile.

    The volatility of a stock relative to the overall market is known as its beta, and the volatility triggered by internal factors, regardless of the market, is known as a stock's alpha.

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