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I understand we can speculate that volatility could increase due to lower trading volumes, but the lower volumes aren't the only factor to take into account in
by tomchristie 11y ago
I understand we can speculate that volatility could increase due to lower trading volumes, but the lower volumes aren't the only factor to take into account in this scenario.
- vasilipupkin 11y agoright, well, think of it this way. Trading process is the process of price discovery. Most recent traded price is the current price for the asset, assuming it's trading frequently. An infrequently traded asset creates more uncertainty about what is its actual current market price. And volatility is a function of uncertainty.