Security prices are said to follow a "random walk," which means that:
A)stock selection for portfolio composition is unimportant.
B)it is impossible to know whether stocks offer higher returns than bonds.
C)investment analysts are unnecessary.
D)successive price changes are unpredictable.

Question

Quizplus · Accepted Answer

A "random walk" means that successive price changes cannot be predicted, which makes it difficult to time the market or pick individual stocks based on past performance. This does not mean that investment analysts are unnecessary, as they can still provide valuable insights into company fundamentals and market trends. It also does not mean that it is impossible to know whether stocks offer higher returns than bonds, as historical data has shown that stocks have generally outperformed bonds over the long term.

Security Prices Are Said to Follow a "Random Walk," Which