Random walk - Theory that stock price changes from day to day are at random; the changes are independent of each other and have the same probability distribution. Many believers of the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk.
The theory espoused by French Mathematician Louis Bachelier in 1900 which posits that past share prices are of no use in predicting future prices.According to the theory, share prices reflect reactions of the market to information being fed into the market completely randomly. Since the information is coming in randomly, the price movements they cause are no more predictable than the steps of a drunk.Random walk theory is diametrically opposed to technical analysis. The theoretical underpinning of technical analysis is that markets react in a consistent way to share price movements. By looking at charts of past price movements, investors can identify patterns which have occurred before, and can anticipate future price movements because the market tends to react in the same way.
Random walk : theory that stock price changes from day to day are at random; the changes are independent of each other and have the same probability distribution. many believers of the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk.
the theory espoused by french mathematician louis bachelier in 1900 which posits that past share prices are of no use in predicting future prices.according to the theory, share prices reflect reactions of the market to information being fed into the market completely randomly. since the information is coming in randomly, the price movements they cause are no more predictable than the steps of a drunk.random walk theory is diametrically opposed to technical analysis. the theoretical underpinning of technical analysis is that markets react in a consistent way to share price movements. by looking at charts of past price movements, investors can identify patterns which have occurred before, and can anticipate future price movements because the market tends to react in the same way.
Random walk