Literature Review:
1) The Random walk theory gained popularity in 1973 when Burton Malkeil wrote book on “Random walk down wall street” and now the book is considered as one of the investment classic. This theory was mainly dealt with the past movement of the price of a stock or overall market cannot be used to predict its future movement but over a period of time prices maintained on a upward trend and thus this theory was criticized. In short, this theory says that stocks take a random and unpredictable path and the chance of stock going up is same as it is going down and some followers of this theory believed that it is impossible to outperform the market without expecting the additional risk and in this theory Malkeil predicts that both technical and fundamental analysis are waste and they are unproven in outperforming the market. Malkeil always advised that long term buying and holding of shares is best as individuals should not be based on the time of the market and attempts which are based on analysis are failure and you cannot rely on them and he backs up this statement giving an example on the mutual funds which fails to beat benchmark averages like S&P 500.
Many still follow the rules of Malkeil predictions and other believe that the investing purpose in the mindsets of the people has changed and this theory no longer holds importance on the market landscape as it was written 30 years ago and in today’s information environment everybody has the easy access and relevant information on markets and stock prices and investing is no longer considered as privileged and this theory was no longer popular on the wall street as it condemns the concept on which it is based such as technical, fundamental stock picking analysis. It is hard to believe on how the market conditions change over a period of time and arguments supports both sides of the sayings but in general it is always better to research about a... [continues]
1) The Random walk theory gained popularity in 1973 when Burton Malkeil wrote book on “Random walk down wall street” and now the book is considered as one of the investment classic. This theory was mainly dealt with the past movement of the price of a stock or overall market cannot be used to predict its future movement but over a period of time prices maintained on a upward trend and thus this theory was criticized. In short, this theory says that stocks take a random and unpredictable path and the chance of stock going up is same as it is going down and some followers of this theory believed that it is impossible to outperform the market without expecting the additional risk and in this theory Malkeil predicts that both technical and fundamental analysis are waste and they are unproven in outperforming the market. Malkeil always advised that long term buying and holding of shares is best as individuals should not be based on the time of the market and attempts which are based on analysis are failure and you cannot rely on them and he backs up this statement giving an example on the mutual funds which fails to beat benchmark averages like S&P 500.
Many still follow the rules of Malkeil predictions and other believe that the investing purpose in the mindsets of the people has changed and this theory no longer holds importance on the market landscape as it was written 30 years ago and in today’s information environment everybody has the easy access and relevant information on markets and stock prices and investing is no longer considered as privileged and this theory was no longer popular on the wall street as it condemns the concept on which it is based such as technical, fundamental stock picking analysis. It is hard to believe on how the market conditions change over a period of time and arguments supports both sides of the sayings but in general it is always better to research about a... [continues]
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