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 are unpredictable, which makes it difficult to consistently make profitable investment decisions. It does not necessarily mean that stock selection is unimportant or that investment analysts are unnecessary, but it does make it harder to rely solely on analysis and prediction to build a successful investment portfolio. It also does not mean that it is impossible to know whether stocks offer higher returns than bonds, as there are historical trends and statistical analysis that can provide insight into market performance.

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