If stock prices are said to follow a random walk, it means:
A) that the market is inefficient.
B) that investors do not react to new information.
C) that price movements can be determined by technical analysis.
D) that changes in price are independent of past price changes and cannot be predicted.

Question

Quizplus · Accepted Answer

Changes in stock prices following a random walk imply that they are independent of past price changes and are unpredictable, aligning with the Efficient Market Hypothesis which suggests that current stock prices fully reflect all available information.

If Stock Prices Are Said to Follow a Random Walk