What is market volatility?

Market volatility refers to the degree of variation in the price of a financial asset over time, and it is often characterized by sudden and rapid price movements. This indicates uncertainty in the market as prices can fluctuate sharply within short periods. The presence of volatility usually reflects underlying factors such as changes in market sentiment, economic indicators, or geopolitical events, which can lead to unpredictable price swings. Consequently, investors often view volatility as a measure of risk—higher volatility indicates a greater level of uncertainty surrounding the asset's future price movements. Understanding this concept is crucial for making informed investment decisions, particularly in dynamic markets where price stability cannot be relied upon.