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   Square Root Law
   















 

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Square Root Law

The principle that the standard deviation of a Markov process usually increases proportionately to the square root of time. This relationship is often used to estimate an annualized volatility from a short-term volatility measurement or estimate. For example, a monthly volatility (standard deviation) can be converted to an annualized number by multiplying it by

See also Markov Process.

Glossary * S