With a few bad weeks in the market, there's now a lot of talk about stock price volatility and risk. In fact, for many people, the words "risk" and "volatility" are synonymous. Although this idea that price volatility is risk is not a new one, this belief has been exasperated by the great recession of 2008. Of course upward volatility is okay, and investor psyches are calm and/or excited when it is occurring. On the other hand, investors are often so petrified by downside volatility that they are incapable of making distinctions regarding whether a price drop is justified or not.
Consequently, a drop in the price of one of their stocks, or even the perception of one, can stimulate irrational fear-based behavior. Once we allow emotion to take charge of intellect, the propensity to make mistakes greatly increases. The real truth is that not all stock price volatility is
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