Which one of the following best describes most series of asset prices?
A) An independently and identically distributed (iid, i.e. "completely random") process
B) A random walk with drift
C) An explosive process
D) A deterministic trend process

Question

Quizplus · Accepted Answer

Most series of asset prices are best described as a random walk with drift. This means that the future price is based on the current price plus a random change and possibly a consistent upward or downward trend (the drift). This model captures the unpredictable nature of asset prices while allowing for a general trend over time.

Which One of the Following Best Describes Most Series of Asset