I would like to hear other possible ways of classifying Stocks by the Volatility of their returns. Assuming that I want to characterize each stock as Low, Medium or High Volatility Stock and assuming that I know the Annualized Volatility for each of the stocks in my sample, what ways are there to do such classification? I can think of two:
- Below, say, 30th percentile (of the Annualized Volatilities) -> Low Volatility; Between 30th and 70th Percentile -> Medium Volatility; Top 30th percentile -> High Volatility
- (-2)*Std.Dev (of the distribution of the Annualized Volatilities) -> Low Volatility; Between (+-2)*Std.Dev -> Medium Volatility; (+2)*Std.Dev -> High Volatility
Feel free to point out papers where I can find my answer.