Value Averaging: The Safe and Easy Strategy for Higher Investment Returns (Wiley Investment Classics Book 35)

by Michael E. Edleson

It is much more likely that the price of a $100 stock is outside a range of $80-$120 after a decade than after a month. This “total volatility” is a different concept than “annualized” or average volatility, which decreases over time (as you saw in previous chapters). As time increases, total volatility increases by the square root of time, but average volatility per period decreases by the square root of time. A simplified example: If the standard deviation of return over 1 year is 20%, what happens over a 4-year period? The square root of the time increase (four) is two. So total volatility over the entire 4-year period doubles to 40%; thus, average volatility each year is halved to 10% per year.

總變動性是時間的平方根增加 平均變動性是時間的平方根減少