Historical volatility is the volatility calculated based on historical data. It is calculated from the average change rate of the underlying asset price such as stocks, foreign exchange, bonds in the past fixed period. It corresponds to Sigma (σ) of the standard deviation mentioned in statistics. It is practically used when predicting the current price movements from past price movements. When the historical volatility is 16.5%, it shows that the market fluctuation in the past was 16.5%. In general, it is common to use 20 or 30 days as the period for measuring daily returns. As a factor to be multiplied when annualized conversion of the standard deviation of the daily, it seems that the annual business day is 250 to 260 days, and it seems that it often multiplies by 250 to 260 square root. The Nikkei average historical volatility is the historical volatility of the Nikkei Average stock price calculated and published by the Nihon Keizai Shimbun. Historical volatility is also used to infer forecast volatility.
Used in M & A price risk assessment at acquisition
In asset management, it is said that if market figures are going down, it is said that power is gaining in the market, and it is said that it is suitable for measuring the timing to take positions while looking at the market in the medium term. Large stocks with high volatility are risky for short-term investors. However, it increases the chances of making a profit. On the other hand, low-volatility brands have lower risk and lower profitable opportunities. And if historical volatility continues to decline due to the market average etc., I think that the market price will move to either side. M & A is mergers and acquisitions of companies, companies are to acquire other companies and become one. And historical volatility has great implications for buyers. As the buyer side of the company, there is a point that M & A places emphasis on historical volatility, and the buyer side company needs to determine the risk in advance in order to acquire it. By doing so, if we can grasp the risks in acquisitions, we will be able to respond when problems arise and we will be able to smoothly process damages and other problems.