An investment theory which claims that market prices follow a random path up and down, without any influence by past price movements, making it impossible to predict with any accuracy which direction the market will move at any point. In other words, the theory claims that path a stock's price follows is a random walk that cannot be determined from historical price information, especially in the short term. Investors who believe in the random walk theory feel that it is impossible to outperform the market without taking on additional risk, and believe that neither fundamental analysis nor technical analysis have any validity. However, some proponents of this theory do acknowledge that markets move gradually upward in the long run.
Related information about random walk theory:
- Random walk hypothesis - Wikipedia, the free encyclopedia
... University of Pennsylvania, respectively, have also tried to prove the random walk theory wrong. They wrote the book A Non-Random Walk Down Wall Street, ...
- Random Walk Theory Definition | Investopedia
The theory that stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market ...
- Financial Concepts: Random Walk Theory | Investopedia
Find out if a stock's history can predict its future movement.
- Random Walk Theory Definition & Example | InvestingAnswers
We explain the definition of Random Walk Theory, provide a clear example of how it works and explain why it's an important concept in business, finance ...
- What is random walk theory? definition and meaning
Definition of random walk theory: An investment theory which claims that market prices follow a random path up and down, without any influence by past price ...
- Random Walk Theory - Financial Dictionary - The Free Dictionary
An investment philosophy holding that security prices are completely unpredictable, especially in the short term. Random walk theory states that both ...
- random walk theory - The Free Dictionary
(Economics, Accounting & Finance / Stock Exchange) Stock Exchange the theory that the future movement of share prices does not reflect past movements and ...
- Random Versus Non-Random - ChartSchool - StockCharts.com
Random walk theory jibes with the semi-strong efficient hypothesis in its assertion that it is impossible to outperform the market on a consistent basis. This theory ...