IRJC International Journal of Marketing, Financial Services & Management Research Vol.1 Issue 8, August 2012, ISSN 2277 3622 www.indianresearchjournals.com 1 FORECASTING VOLATILITY IN EQUITY PRICES DR. S.D. VASHISHTHA*; DR. SHYAM VASHISHTHA**; RAJESH KUMAR*** *Dean and Professor, Faculty of Commerce, M.D. University, Rohtak. **Assistant Professor, B.L.J.S.P.G.College, Tosham. ***Research Scholar, Department of Commerce, M.D. University, Rohtak. ABSTRACT Volatility Forecasting helps to investors or players in the capital market to find out the buy and sell signals about shares on the basis of quantity of risk thereon. In this paper researchers examine the volatility in equity share prices of selected units under study. To measure the volatility, the prices (for the financial year 2010-11) of Tata Motors Ltd. and Eicher Motors Ltd. were analyzed with the help of statistical tool like, Mean, S.D. and t-statistics. The volatility in the prices of Tata Motors was found of gyrated nature. It was concluded that volatility analysis is a faithful analysis to measure the risk on financial assets and it is also helpful to take short and long position in the market. KEYWORDS: Volatility, Security, Short Position, Long Position, Market. ______________________________________________________________________________ INTRODUCTION Prices of securities move up and down everyday in the stock markets. These ups and downs are known by namely Fluctuation in the prices. Fluctuation in prices of a security comes from the unbalanced demand and supply of that security. If demand side of a security is greater than its supply, the price would start to go up and if supply side is greater than its demand, the price would start to go down. The relative rate of fluctuation at which price of a security moves up and down is called volatility or in other words, volatility refers to the amount of risk about the size of changes in a security‟s value. It means if volatility increases in the prices of a financial instrument, the risk also increases on that instrument. Sometime question arises that why volatility is important? The volatility does not measure the direction of prices but it measures the desperation among the prices which helps to know the risk (probable deviation from the expected) on an instrument. On the basis of risk on an instrument, investors can analyze their capacity to bear risk and also can make decisions relating to invest their excess fund in financial assets.