Asked by Jamilla Cason on Jul 12, 2024
Verified
What does "random walk" mean? According to the efficient markets hypothesis, should stock prices follow a random walk?
Random Walk
A theory suggesting that stock market prices follow a random path, making it impossible to predict future price directions based on past information.
Efficient Markets Hypothesis
A financial theory stating that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns than the overall market.
- Grasp the principles of the efficient market hypothesis, including the implications for stock prices and investment strategies.
Verified Answer
EN
Ealan NisanovJul 16, 2024
Final Answer :
A random walk means the path of a variable is impossible to predict. According to the efficient markets hypothesis stock prices should follow a random walk because they reflect all publicly available information.
Learning Objectives
- Grasp the principles of the efficient market hypothesis, including the implications for stock prices and investment strategies.