Random walk theory

(redirected from walk)
Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Idioms, Encyclopedia, Wikipedia.

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 theory.

The random walk theory holds that it is futile to try to predict changes in stock prices.

Advocates of the theory base their assertion on the belief that stock prices react to information as it becomes known, and that, because of the randomness of this information, prices themselves change as randomly as the path of a wandering person's walk.

This theory stands in opposition to technical analysis, whose practitioners believe you can predict future stock behavior based on statistical patterns of prior performance.

References in classic literature ?
I received her as politely as I could, because I think she was sorry she dared me to walk a ridgepole.
George and Helen arose and walked away into the darkness.
His heart was still proud and high, and he walked up to the seat which he had last occupied as a sixth-form boy, and sat himself down there to collect his thoughts.
"Colonel," said Father Brown, "I tell you that this archangel of impudence who stole your forks walked up and down this passage twenty times in the blaze of all the lamps, in the glare of all the eyes.
"Thank you, thank youbut on no account.I would rather walk. And for me to be afraid of walking alone!I, who may so soon have to guard others!"
He grows vespertinal in his habits as the evening of life approaches, till at last he comes forth only just before sundown, and gets all the walk that he requires in half an hour.
Such violence of affliction indeed could not be supported for ever; it sunk within a few days into a calmer melancholy; but these employments, to which she daily recurred, her solitary walks and silent meditations, still produced occasional effusions of sorrow as lively as ever.
It was the long walk outside the gardens with the walls round them.
Green and his sisters had sent their carriage back empty, in order to enjoy the bright sunshine and balmy air in a sociable walk home along with their visitors, Captain Somebody and Lieutenant Somebody-else (a couple of military fops), and the Misses Murray, who, of course, contrived to join them.
But we took a moonlight walk last Monday night, to talk it over at leisure, and I represented the case to him as it really is.
The two women had no intention of bathing; they had just strolled down to the beach for a walk and to be alone and near the water.
Underneath the elms we parted, By the lowly cottage door; One brief word alone was uttered Never on our lips before; And away I walked forlornly, Broken-hearted evermore.