Why did Apple instantly become the most volatile stock in the US?
"I looked at data from Sept 2010 to present: Standard deviation is what shows the spread shape of returns over time, and it meanS that about 2/3 of the time, AAPL return was within +/- 1.65 higher/lower than the daily average return which was .21 %. Not sure where to go with this except to suggest that in fact, AAPL is more volatile than the S&P and even another random tech company. With time, I'd probably come up with a list of stock more volatile. I know that when I look at a list of stocks I track on Yahoo, there are always a few that are just as volatile on a given day.  Excel makes the above analysis easy to do for a given stock, and it's actually an interesting exercise, at least for me. Disclaimer - the shape of stock returns is not a bell curve, and STdev is just a best fit.  Edit - given more time to tinker on excel, it would be interesting to see how the stock's volatility tracked over the years, did it increase or does it feel that way due to the high price? A $20 swing on a $600 stock is the same as a $2 swing on a $60 stock, yet ""up $20"" sounds huge."
"The main difference between a bull market and a bear market is due the ""the leverage effect"". http://www.princeton.edu/~yacine/leverage.pdf The leverage effect refers to the observed tendency of an asset’s   volatility to be negatively correlated with the asset’s returns.   Typically, rising asset prices are accompanied by declining   volatility, and vice versa. The term “leverage” refers to one possible   economic interpretation of this phenomenon, developed in Black (1976)   and Christie (1982): as asset prices decline, companies become   mechanically more leveraged since the relative value of their debt   rises relative to that of their equity. As a result, it is natural to   expect that their stock becomes riskier, hence more volatile. More volatile assets in a bear market are not such good investments as less volatile assets in a bull market." "It's not necessarily bad but it can cause the stock price to become a lot more volatile. Depends on which side of the bet you're on ;) Suppose a hedge fund manager thinks a company is poorly run. He may buy a ton of shares so that he can get rid of the current CEO and replace it with his/her own. For the hedge fund and others long on the stock, this is good. Those who are trading options or using some short-term strategies could get screwed because of the sudden volatility.  My next point is related to the above. What is the intrinsic value of a stock? The current price of a stock is the equilibrium of all investor's perception of the stock's value. Professionals make up a value for a stock using models such as DCF. Once they do so they trade based on what they believe the value of the stock is. You might calculate a stock is worth 70 and I believe it's 80 so the stock price is going to fluctuate a bit but it should keep within that range (assuming we're the only investors). Then comes a hedge fund manager, say Carl Icahn, and discloses a stake in our stock. ""Wow, the stock must be really valuable!"" Everyone starts buying this stock so up it goes to 90, simply because the guy who seems to know what he's doing bought it. The point here is that now it's not trading based on intrinsic value, now it's purely psychological. Ie. it's now a momentum stock, which you have no idea when it'll crash. Look at Tesla, Netflix, or just google momentum stocks. All the big crashes in stock prices happen when these big funds unload their stocks. A surge in supply will cut the price. The problem is you can't predict when some fund manager will decide to sell some stake of his.  Tying everything together is liquidity. The more liquid a stock is, the easier it is to obtain and the less volatile it is. The more people playing the game, with not too big shares of stock, the faster the price will converge to some equilibrium and with less volatility. Institutional investors take away liquidity." "This is an interesting question that may actually be better suited to Quant.SE. First of all, stock prices are random variables, or, to be more precise, stochastic processes (a time-ordered string of random variables).  The alternative to being stochastic is being deterministic, and I doubt you believe that stock prices are deterministic (meaning, they are fully knowable in advance).  The fact that real world events drive the randomness has no bearing on whether or not it is random.  So, to start, I think you have confused the technical definition of random with a colloquial concept. Now, the heart of the question is whether stock prices are memoryless.  Ultimately, this is an empirical question that has been addressed in many academic studies.  The conclusion of most of this research is that stock prices are ""almost"" memoryless, in the sense that the distribution of future stock prices displays very little dependence upon past realizations, although a few persistent anomalies remain.  One of the most robust deviations from memorylessness is the increase in the volatility of a stock following large declines.  Another is persistence in volatility.  In general, in fact, the volatility is far more predictable than the mean of stock price changes.  Hence ""memorylessness"" is a far stronger assumption than the efficient markets hypothesis. The bottom line, however, is that the deviations from memorylessness are relatively small.  As such, despite its limitations, it is a decent working assumption in some contexts." "Certainly, there aren't algorithms lying in wait for me to enter a buy order for a couple thousand dollars worth of APPL. However, anybody that has a pension plan or a 401k gets shaved by predatory HFT. This is the majority of *ordinary investors*. Most of the population doesn't trade in individual stocks. The ones that have their investments managed by large funds are most certainly affected. Katsayuma's dissection of the underlying mechanisms makes that abundantly clear. I can understand why those with a financial stake attempt to discredit Katsuyama, but it's fairly transparent bullshit. Bullshit that ""you seem to have been suckered in"" by." Sounds like apple is using leverage, derivatives and its balance sheet responsibly. The numbers are big because this is the largest company in the world.    Obviously, they are gonna get in trouble if people stop buying iPhones, but if there core business remains healthy they will have no issue accessing capital markets to issue debt.   The foreign cash holdings is actually held at bank accounts in ny or ca held in US government securities as tax law allows.  If they sell government securities and use the cash they will be subject to the 35% tax.  In any case the only risk I see at these levels is apple may be taking corporate credit risk it doesn't understand or can't model....  I didn't realize how big these financial operations were getting - great share! Imagine how foolish the people that bought Apple at $100 must have felt. It was up tenfold for the $10 it traded at just years prior, how could it go any higher?  Stocks have no memory. A stock's earnings may grow and justify the new higher price people are willing to pay. When FB came public, I remarked how I'd analyze the price and felt it was overvalued until its earnings came up. Just because it's gone down ever since, doesn't make it a buy, yet. It could be an endless number of reasons for it.  It could simply just be a break through a long term resistance causing technical traders to jump in.  It could be an analyst putting out a buy recommendation.  If fundamentals have not changed then maybe the technicals have changed. Momentum could have reached an oversold position causing new buyers to enter the market. Without knowing the actual stock, its fundamentals and its technicals, no one will ever know exactly why. "It's tough to share exactly what happened. Go to yahoo and look at the chart for Cisco from 1990 to 2003 or so. From a split adjusted 8 cents a share, it peaked at just under $80 in March 2000, up by a factor of 1000. People were buying in thinking this stock would continue to rise at this pace, but logic says that's preposterous. By April of 2001, it was down to $14, 80% off its high, and later to drop below $10.  This was a classic bubble and should be studied so you don't get caught in them. A book titled Extraordinary Popular Delusions & the Madness of Crowds was published in 1841, yes is still an interesting read. Bubbles in markets are not new, but can be recognized and avoided. Cisco at $80 had a market cap of $438B. Had it risen 1000 fold over another decade, it would have been worth $438T, but all the wealth in the US isn't even $75T, so something was wrong, very wrong. This is one story, one stock. A remarkable time.  Yes, many companies went under, and the employees lost their jobs. And those who were heavy into the ""dotcom"" stocks lost as much as 80% (or more) of their wealth. Entire 401(k) accounts dropping this amount due to bad decisions. Those who bailed out in time survived, some doing better than others."