Transitory Volatility

Definition

Transitory Volatility in plain English

A stock's price wiggles for two very different reasons: because the company's real worth changed, or just because of the mechanics of buying and selling. Transitory Volatility is that second, temporary kind — the harmless jitter created by trades bouncing between the buy price and the sell price, or by a big order nudging things briefly. Think of a bathroom scale that reads slightly different each time you step on even though your weight hasn't changed — the noise comes from the measuring, not from anything real. These wiggles tend to wash out quickly, unlike moves driven by genuine changes in value.

Learn these first

• Quote Rule
• Resiliency

Related Market Microstructure terms

• Amihud Illiquidity Measure
• Ask (Offer)
• Bid
• Bid–Ask Bounce
• Bid–Ask Spread
• Dealer
• Depth
• Effective Spread
• Inventory Risk
• Lee–Ready Algorithm