If stock prices follow a random walk,
A)it implies that investors are irrational.
B)it means that the market cannot be efficient.
C)price levels are not random.
D)price changes are random.

Question

Quizplus · Accepted Answer

If stock prices follow a random walk, it means that price changes are random and there is no predictable pattern or trend to their movement. This does not necessarily imply that investors are irrational or that the market cannot be efficient. Random walks are consistent with the efficient market hypothesis, which suggests that current market prices fully reflect all available information and that it is impossible to consistently outperform the market by using past price trends or other indicators.

If Stock Prices Follow a Random Walk