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🌬️ Spreading out 📈 Volatility difference 🥛 A mixed substance
dispersion

dispersion

1 9.3
A gap traders use to profit from how much an index and its stocks may change in price
  • noun
  • /dɪsˈpɜrʒən/
  • Jargon
translation icon : dispersión
  • The dispersion of implied volatility among the component stocks indicates potential trading opportunities.
  • dispersion relation
  • price dispersion

Examples

  • So we get very low price dispersion when we have high search costs.

  • Only the dispersion of risks could prevent such a failure, but this required a heterogeneous membership.

    Academic text (1996)

  • Dispersion of risk, thought to be beneficial, turned out to be disastrous.

    Academic text (2008)

  • Regardless, this price dispersion undoubtedly contributed to the simplification of the geographic restrictions in the trading market, which has increased market liquidity.

    Academic text (2000)

  • Dispersion in the contemporaneous LTV ratio of individual properties also influences foreclosure rates.

    Academic text (2016)

  • For example, with more noise in the public inflation signal, firms might put more weight on idiosyncratic signals, leading to greater price dispersion and, as a consequence, misallocation.

    Academic text (2016)

  • Andres Drenik and Diego Perez (2016) find a 13 percent increase in price dispersion in Argentina following the manipulation of the official inflation rate.

    Academic text (2016)

  • Traders often analyze price dispersion to determine the market's reaction to economic events.

  • Understanding the dispersion of risks across a portfolio can help mitigate potential losses.

Compounds

dispersion medium
  • Specialized
7.8

A liquid or gas that has tiny particles spread through it

Surface Forms

dispersion singular
dispersions plural

Morphology

dispersion = disperse (semi-transparent) = disperse + ion

Morphologically formed from 'disperse' + '-ion', but the finance sense is a specialized technical extension that is not predictable from the general verb alone for average learners.

Etymology

Dispersion in finance keeps the same idea: it comes from dis- 'apart' and spergere 'to scatter', so it describes values that are 'spread apart'. That's why traders use dispersion to talk about how the risks or volatilities of individual stocks can be 'scattered' away from the index.