Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Bank of America Corp (BAC) Is Down Again Today

Since the beginning of this week, shares of Bank of America Corp (NYSE:BAC) have fallen by more than 5% while the S&P 500 is down only 1.3%. What explains the difference?

The answer is twofold.

Bank of America Corp (NYSE:BAC)The first part of the answer has little to nothing to do with anything that’s taken place over the last few days. Since the financial downturn, B of A has become one of the most heavily traded stocks on the market. High-frequency traders love it because it’s cheap enough on a per-share basis to trade massive amounts of stock at a reasonable price. In addition, it offers virtually limitless liquidity because of its nearly 11 billion outstanding shares. For these reasons, along with the natural rise in high-frequency operations, it went from trading an average of 11.7 million shares a day in 2000 up to an average of 198 million last year, a nearly 17-fold increase.

Source: Yahoo! Finance.

With this in mind, it should come as no surprise that B of A’s shares have become exceeding volatile. In the investment world, volatility is expressed by a stock’s beta. A beta of 1 indicates that a stock moves in perfect unison with the broader market. A beta of less than 1 implies less volatility. And a beta of more than 1 implies more volatility. In B of A’s case, its beta is somewhere between 1.8, which is the figure Yahoo! Finance provides, and 2.4, the figure provided by the financial screener On any given day, in turn, B of A’s stock price is between 80% and 140% more volatile than the broader market.

On top of this is the second part of the answer, as B of A isn’t immune from the influence of outside events. The events impacting the bank this week concern the housing market, the health of which is critical for the success of virtually any bank. While housing prices and sales volumes have been gradually improving over the past two years, data released yesterday suggests that the market took a breather last month. According to the Commerce Department, housing starts fell by 8.5% in January compared to December; though they were up 23.6% on a year-over-year basis.

In addition, as my colleague Amanda Alix noted yesterday, there’s growing evidence that the Federal Reserve could terminate its third round of quantitative easing earlier than expected. The minutes from the Fed’s most recent monetary policy meeting were released yesterday, and they show that a growing number of the committee members believe it’s time to start winding the program down. Because this round is focused on spurring housing prices and demand via lower mortgage rates, this has many a bank investor worried.

The article Why Bank of America Is Down Again Today originally appeared on and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool owns shares of Bank of America.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!