Random Walks in Stock Market Prices
FOR MANY YEARS economists, statisticians, and teach-
ers of finance have been interested in developing and testing models of stock price behavior. One important model that has evolved from this research is the theory of random walks. This theory casts serious doubt on many other methods for describing and predicting stock price behavior methods that have considerable popularity outside the academic world. For example, we shall see later that if the random walk theory is an accurate description of reality, then the various "technical" or "chartist" procedures for pre- dicting stock prices are completely without value. -

In general the theory of random walks raises chal- lenging questions for anyone who has more than a passing interest in understanding the behavior of stock prices. Unfortunately, however, most discussions of the theory have appeared in technical academic journals and in a form which the non-mathematician would usually find incomprehensible. This article describes, briefly and simply, the theory of random walks and some of the important issues it raises concerning the work of market analysts. To preserve brevity some aspects of the theory and its implications are omitted. More complete (and also more technical) discussions of the theory of random walks are available elsewhere; hopefully the introduction provided here will encourage the reader to examine one of the more rigorous and lengthy works listed at the end of this article. Common Techniques for Predicting Stock Market Prices

In order to put the theory of random walks into perspective we first discuss, in brief and general terms, the two approaches to predicting stock prices that are commonly espoused by market professionals. These are ( 1 ) "chartist" or "technical" theories and (2) the theory of fundamental or intrinsic value analysis. The basic assumption of all the chartist or technical theories is that history tends to repeat itself,...

...EFFICIENT MARKET THEORY AND TESTS
Introduction
Market Efficiency
A market is said to be efficient if prices in that market reflect all available information. Market efficiency refers to a condition in which current stock prices reflect all the publicly available information about a security.
Efficient market emerges when new information is quickly incorporated into the share price so that the price becomes information. In other words the current market price reflects all...

...investment analysis FIN617 Winter 2013
Professor: Robert Elliott
Subject: final essay
Name: Feifei Chen
The essential of a randomwalk is the changes of stocks are irregular following Brownian movement; the path of price changes is unpredictable. Mentioning prediction of the future, an autoregressive time-series is a significant and effective model. For a randomwalk without drift, however, standard regression analysis on the...

...Studies of these relations began with the simplest ‘randomwalk’ hypothesis stating that price reactions are unforecastable. It was supported by ‘martingale’ stochastic process. Theoretically it is not possible to fully exist, as there would be no place for speculation and participants would become more like gamblers than stock traders. However it laid foundations to further studies. Use of more sophisticated technology enabled to determine non-random...

...Statistical Methods & Capital Markets
Testing RandomWalk Hypothesis
Nicolas Mancini
* Table of Content
Abstract
Theoretical background
Methodology
Data & Results
Comparison
Conclusion
References
-------------------------------------------------
I. Abstract
The aim of this paper is to test the randomwalk hypothesis by applying the runs test on time series of several selected stocks. The...

...“Stock Market Prices follow the RandomWalks”
An evidence of Efficiency of the Karachi Stock Exchange (KSE)
Salman Hashmat
MBA-II
Superior University Lahore
E-mail: salmanhushmat@yahoo.com
Waqas Hameed
MBA-II
Superior University Lahore
Adeel Arshad
M.Phil (Finance Scholar)
Superior University Lahore
E-mail: adi_00782@yahoo.com
Shahid Nasim
M.Phil (Finance Scholar)
Superior University Lahore
E-mail: shahid.nasim208@gmail.com
Abstract
This...

...Tests of RandomWalk Hypothesis
In this paper, the randomwalk hypothesis based on monthly stock market returns is tested by comparing variance ratios. The randomwalk model is not rejected for the entire sample period (1926-2007) and for its subperiods when using value-weighted stock returns. However, the model is rejected on equal-weighted stock returns when using low aggregation values q. Generally,...

...Stock Market Prices Do Not Follow RandomWalks: Evidence from a Simple Specification Test
Andrew W. Lo A. Craig MacKinlay University of Pennsylvania In this article we test the randomwalk hypothesis for weekly stock market returns by comparing variance estimators derived from data sampled at different frequencies. The randomwalk model is strongly rejected for the entire sample period (19621985) and for all...

...Thiss thesis contains work on reinforced randomwalks, the reconstruction of random sceneriess observed along a randomwalk path, and the length of a longest increasing subsequencee in a random permutation. In this introduction, I will survey some of the work inn the area and describe my results. Furthermore I will explain how all three subjects fit intoo the framework of random...

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