random walk

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Random walk

Theory that stock price changes from day to day are accidental or haphazard; changes are independent of each other and have the same probability distribution. For a simple random walk, the best forecast of tomorrow's price is today's price. Related: Mean reversion.

Random Walk Theory

An investment philosophy holding that security prices are completely unpredictable, especially in the short term. Random walk theory states that both fundamental analysis and technical analysis are wastes of time, as securities behave randomly. Thus, the theory holds that it is impossible to outperform the market by choosing the "correct" securities; it is only possible to outperform the market by taking on additional risk. Critics of random walk theory contend that empirical evidence shows that security prices do indeed follow particular trends that can be predicted with a fair degree of accuracy. The theory originated in 1973 with the book, A Random Walk Down Wall Street. See also: Efficient markets theory.

random walk

see EFFICIENT-MARKETS HYPOTHESIS.
References in periodicals archive ?
Bachelier characterized stock market speculation as "fair game" (or Martingale property) of an unbiased random walk wherein no speculator could earn excess returns due to random price fluctuations.
The main purpose of the present study is to test the random walk hypothesis that past prices cannot be used to predict the future price movements.
The efficient market hypothesis keeps a relation with the random walk theory.
The vector [pi] is the invariant probability vector of the Markov chain associated to [GAMMA]; its entries can be used for ranking purposes, since they quantify the probability of visiting each node during random walks.
A stronger version of the time-invariance is involved, if the markets display different degrees of informational efficiency and the prices' evolution itself is close to a pure random walk process (eventually with drift).
On the number of jumps of random walks with a barrier.
Both unsophisticated models (random walk and random walk with drift) and more complex models (Box-Jenkins ARIMA and vector autoregressive models) are developed for the line items.
Some scientists are now looking at potential applications of Levy random walks and Levy statistics to the foraging behavior of ants and bees.
n], see Figure 3 below) in connection with the arising (natural) strong reflection principle of the corresponding random walks lead to the helpful observation that exit times from balls equal crossing times through subgraphs of [V.
that this might be an unsolved problem in random walks," Stanley says.
While there is a substantial literature on random walks in the first quadrant of the plane (3; 5), the problem we analyze here seems to be unique and only some partial results were reported thus far; see Jan son (7).