|Overview: Random Walk|
The theory that stock prices are a series of random steps that can't be predicted.
Louis Bachelier, 1900
What is a Random Walk?
John Spacey, updated on October 04, 2016
The random walk hypothesis is the theory that stock market prices are a random series of price movements that can't be predicted. The hypothesis is consistent with well accepted economic principles such as the efficient market theory. Nevertheless, the random walk hypothesis is contested by a wide variety of competing theories that suggest that fundamentals, patterns or trends can be useful in predicting market prices. A random walk is a mathematical model that describes a path of random steps such as that of a foraging animal. Stock markets have a tendency to go up with time and are therefore not completely random in nature. Nevertheless, a random walk is useful as an analogy as it is extremely difficult or impossible to predict prices in the short to medium term.
ThinkingThis is the complete list of articles we have written about thinking.
If you enjoyed this page, please consider bookmarking Simplicable.
The difference between two common investment measurements.
An overview of Regression Toward The Mean.An overview of the Efficient Market Hypothesis.
An overview of animal spirits, a theory of investing.A definition of financial market with examples.
A definition of Mr. Market, an investing theory.
A definition of organic growth with examples.
The common types of concept company.A definition of information costs with examples.
The definition of channel check with examples.
An overview of a Keynesian beauty contest, an investing theory.
Prices that stick to an established range and resist changing economic forces such as inflation.A definition of markets with examples.
The common types of market conditions.
The definition of foreign direct investment with examples.
The definition of wealth with examples.The basic types of capital with examples of each.
TrendingThe most popular articles on Simplicable in the past day. Recent posts or updates on Simplicable. Site Map