Just like people, stocks seem to have their own personalities. Some are volatile, bouncing all over the short term, rapidly up and down in price like a yo-yo. Others are relatively docile and move more slowly, with a small changes in price on a steady pace over long periods of time. Volatility may be caused by a variety of factors - among them are trader emotions like fear and panic, which can cause massive sell offs or buying sprees.

In a jittery, uncertain market with nervous investors, major news events, both positive and negative, can cause big price moves, either down or up. Wars, revolutions, famines, droughts, strikes, political unrest, recessions or depressions, inflation, deflation, bankruptcies of major industries and fluctuations in supply and demand can all cause stock prices to drop precipitously.

Some big hedge funds and private equity firms, with excessive debt incurred to finance stock market investments, have been forced to sell assets in a declining market to pay off margin calls. These large-lot sales also cause big declines in stock prices.

SEE: An Introduction To Sector ETFs

The Sectors
Technology was the most volatile sector, according to a 2009 study conducted by a firm that tracked U.S. stock performance in the S&P 500 index. According to data analyzed by Birinyi Associates Inc., after reporting quarterly earnings, tech sector stocks averaged 4.8% moves in after-hours trading, and 3.4% during regular trading hours during the period studied. Applying the same criteria to track volatility - the average stock price move per sector after quarterly earnings reports - among the other most volatile sectors were the following:

Consumer Discretionary
Included within this sector are retailing, media, consumer services, consumer durables and apparel and automobiles and auto parts. The average change on the trading day for this sector during the period studied was 4.3%.

Energy
Industries in this sector include, oil, gas, coal and renewable energy technologies such as biomass, geothermal, hydrogen, hydro-electric power, ocean energy, solar and wind energies. This sector averaged a change on the day of 3.5%.

SEE: ETFs Provide Easy Access To Energy Commodities

Financial
Banks, brokerage firms, financial services and insurance companies, credit card issuers, financial planners, securities and commodity exchanges form the bulk of this sector. After reporting quarterly earnings in the period studied, the average change in the stock price on the day was 4.1%.

Industrials
Among the major businesses in this sector are aerospace and defense, air freight and courier services, commercial services and supplies, construction and agricultural machinery, diversified trading and distributing, electrical components and equipment, heavy electrical equipment, highways and rail tracks, industrial conglomerates, and rails and roads - freights. The average move on the day after reporting quarterly earnings was 3.7%.

Healthcare
This broad sector includes hospitals, physicians, dentists, medical equipment and supply manufacturers and vendors. The average change on the day of reporting quarterly earnings was 4.4%.

SEE: Investing In The Healthcare Sector

Materials
Companies in this sector pursue the discovery, development and processing of raw materials. Metals mining and refining, chemical manufacturers and forestry products are also included. The average change on the day for this sector was 3.3%.

Telecommunications
The major companies in this sector include phone services, wireless communications services, cable providers, data and Internet services and equipment manufacturers and vendors. The average day move for the sector after reporting quarterly earnings was 3.2%.

The Bottom Line
Over the long term, stock market volatility is about 20% a year, and 5.8% a month. The market typically moves upward over time in small increments. Any deviation in the price of a stock from this expected pattern, either up or down, is the volatility factor. Volatility often frightens investors. The prudent investor prefers a stable, predictable market in which stock prices move as expected and volatility is at a minimum.

Related Articles
  1. Stock Analysis

    Hologic: An Activist Investment Analysis (HOLX)

    Read about a health care company that attracted activist investors Carl Icahn, Barry Rosenstein and Ralph Whitworth at the same time.
  2. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  3. Investing News

    Public Vs. Private Tech Valuations: What's Driving the Divide?

    The gross valuations over the past five years are more indicative of the market than the true value of the company itself.
  4. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  5. Personal Finance

    Zika Virus: Latest Advice on Staying Safe

    Zika has hit the U.S. Here’s a quick review of what’s known about the virus, how it spreads, who’s at highest risk and how to avoid it.
  6. Investing News

    Stryker Corporation: A Strong Capital Position

    A discussion on business operations, financials, valuation and growth trends for Stryker Corporation.
  7. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  8. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  9. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  10. Investing

    How Digital Payments Will Change Commerce in 2016

    The way we transfer and spend money is constantly evolving, and 2016 is poised to expand digital payments like we've never seen before.
RELATED FAQS
  1. Does dental insurance cover implants?

    Dental implants have become a widely used procedure in dentistry. Despite their popularity, however, they tend to not be ... Read Full Answer >>
  2. Does dental insurance cover dentures?

    Most full dental insurance policies include some restorative coverage, usually meaning that up to 50% of the cost of dentures ... Read Full Answer >>
  3. Can CareCredit be used for family members?

    CareCredit has become a widely used option when it comes to paying for medical procedures, primarily procedures not typically ... Read Full Answer >>
  4. Can a Flexible Spending Account (FSA) be used for dental?

    Flexible Spending Accounts (FSAs) can be used to pay for dental expenses including deductibles and co-payments with pretax ... Read Full Answer >>
  5. Does dental insurance cover braces?

    Most regular dental plans cover little to none of the costs of braces. The primary focus of regular dental plans is prevention ... Read Full Answer >>
  6. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center