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Technology Stocks : Netscape** what should be the price?**
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To: Andrew Vargas who wrote (137)11/18/1996 7:27:00 PM
From: Reginald Middleton   of 140
 
<If you look at today's range - USRX = 3 3/8 NSCP = 2 1/4 .
Right at the end of October, there was a day when USRX's range was
from 61+ to 68+ . I trade both these stocks and consider USRX more
volatile in the recent trading sessions.>

That is understandable, but volatility (implied volatiltiy that is) is a mathematical function and not just an obsevation of absolute fluctuation over a nominal period of time. Now USRX, like NSCP, is a very volatile stock, but it is that very volatility that subtracts from its attractiveness to fund managers. Volatitily does not necessar ily have a direct correlation with performance, or put another way, additional risk does not always mean additional reward. A smart portfoliio manager (most of whom loathe actually trading stocks since it increases turnover in the portfolio, or are actually forbidden by prospectus or board charter), seeks to gain the maximum risk adjusted reward, and most rating entities rate them accordingly. Therefore undue volatility is most often avoided in a mutual fund portfolio. If the fund manager runs institutional monies for banks and insurance companies, then additional anti-volatitliy riles and practices come into play, such as tisk based capital guidelines posed by FASB and the respective states of domicile.
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