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

References in periodicals archive ?
When the random walk hypothesis is false, V(N) equals NV(1) plus the covariance between all pairs of returns, thus
When the random walk algorithm is used to generate datasets of objective choice sets, the utility function is:
Runs (Bradley, 1968) and LOMAC variance ratio tests (Lo and MacKinlay, 1988) are used to test the weak form efficiency and random walk hypothesis.
Ko and Lee (1991) argued that "if the random walk hypothesis holds, the weak-form of the efficient market hypothesis must hold, but not vice versa.
With this addition too, random walks on the citation graph give rise to a regular Markov chain, and the invariant probability vector of the chain yields a meaningful ranking of the papers in the collection.
A mobile node chooses a random direction in which to travel similar to the Random Walk Mobility Model.
The random walk test for time-scale variation indicator Final Root MSE z- Prob.
Bernegger (2002) highlights the problems caused by the inventory random walk and weaves an entertaining story of the exploits of an industrial engineer as he tries to apply Lean Manufacturing principles in the hypothetical KDK Corporation.
n] [not equal to] 1, then the first non-zero increment of the random walk with barrier is [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII], and [T.
Evidence that they do not perform better than a random walk in forecasting exchange rates cannot be taken as evidence against the models.
Four timeseries models are employed as expectation models: account-specific Box-Jenkins ARIMA models, a random walk, a seasonal random walk, and a vector autoregressive model.