Random walk

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 New York Times Financial Glossary

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random walk ˌrandom ˈwalk noun [singular]
STATISTICS FINANCE the idea that an amount, level etc changes without any pattern, so that it is not possible to say what future amounts etc will be. Some people think, for example, that prices on financial markets follow a random walk, and that it is impossible to calculate what prices will be in the future by looking at price movements in the past:

• Some recent research has shown persistent exceptions to the random walk model.

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random walk UK US noun [S]
► FINANCE, STOCK MARKET behaviour of shares, interest rates, a financial market, etc. that is random, so that it is not possible to say what future behaviour will be based on past activity: »

The report suggests the exchange rate is on a random walk and it is too difficult to predict where it will settle.

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the random walk hypothesis/theory/model


Financial and business terms. 2012.

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