Question

what is the random walk of the stock market?

Answer 1

Random walk of the stock market : As the name suggests randomness. According to this theory the stock prices and stock market are random i.e. the stock prices are unknown at any point of time, it is not influenced by the past movement or trend of a stock price or market. According to this theory all methods of predicting stock prices are worthless. It doesn't consider technical and fundamental analysis to predict the future movement of stock prices over short-term.

In short we can say that random walk theory considers mainly two assumptions:

• Each stock price or market follows a random walk.
• It also assumes that movement in one stock price is independent of the movement in other stock price