Random Walk Hypothesis

The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk and thus the prices of the stock market cannot be predicted. It is consistent with the efficient-market hypothesis.

The concept can be traced to French broker Jules Regnault who published a book in 1863, and then to French mathematician Louis Bachelier whose Ph.D. dissertation titled "The Theory of Speculation" (1900) included some remarkable insights and commentary. Same ideas were later developed by MIT Sloan School of Management professor Paul Cootner in his 1964 book The Random Character of Stock Market Prices. The term was popularized by the 1973 book, A Random Walk Down Wall Street, by Burton Malkiel, a Professor of Economics at Princeton University, and was used earlier in Eugene Fama's 1965 article "Random Walks In Stock Market Prices", which was a less technical version of his Ph.D. thesis. The theory that stock prices move randomly was earlier proposed by Maurice Kendall in his 1953 paper, The Analytics of Economic Time Series, Part 1: Prices.

Read more about Random Walk Hypothesis:  Testing The Hypothesis, A Non-random Walk Hypothesis

Other articles related to "random walk hypothesis, hypothesis, random walk":

Technical Analysis - Empirical Evidence - Efficient Market Hypothesis - Random Walk Hypothesis
... The random walk hypothesis may be derived from the weak-form efficient markets hypothesis, which is based on the assumption that market participants take full account of any ... In his book A Random Walk Down Wall Street, Princeton economist Burton Malkiel said that technical forecasting tools such as pattern analysis must ultimately be self-defeating "The problem is that once such a ... published a paper which cast doubt on the random walk hypothesis ...
Random Walk Hypothesis - A Non-random Walk Hypothesis
... a book has been written by two professors of economics that tries to prove the random walk hypothesis wrong ... Weber and other believers in the non-random walk hypothesis cite this as a key contributor and contradictor to the random walk hypothesis ... Another test that Weber ran that contradicts the random walk hypothesis, was finding stocks that have had an upward revision for earnings outperform other stocks in ...

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