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 ?
We compared the movements of Aquilonastra anomala sea stars to three random walk models (Brownian motion, Levy walks, and correlated random walks) by examining the sea stars' step length and turn angle distributions.
Semantic relations among words uses two separate random walk algorithm to estimate candidate confidence.
each data node should launch multiple random walks according to the storage nodes n and the degree distribution.
The random walk theory was first brought to light by the discrete approach of Einstein-Smoluchowski, and it consists in treating Brownian motion as a discrete random walk.
X, d) is called transient if there is R > 0 such that the random walk starting at [x.
A more restrictive random walk model requires independence involving higher conditional moments like the variance, skewness, and kurtosis of the probability distribution of price changes.
Random Walk Hypothesis (RWH) states that it is not possible to predict future prices based on the past price movements and it is highly unlikely for anyone to earn profits consistently over time.
Let us start our discussion about Continuous Time Random Walk (CTRW) and different regimes by performing a review of some aspects of the CTRW approach.
This means that stock price can be defined as a random walk (RW) process.
It also implies that the parameters of prices formation do not vary if the analysis frequency is changed--or that the spreads between coefficients can be described as pure random walk processes: