The random walk hypothesis suggests that

Question

Quizplus · Accepted Answer

The random walk hypothesis suggests that future exchange rate movements are unpredictable and that the best predictor of the future exchange rate is the current exchange rate. Therefore, choice A is consistent with the hypothesis, while choice B is not. Choice C is incorrect because it suggests that both choices A and B are consistent with the efficient market hypothesis, which is not necessarily true as the two hypotheses are distinct.  Finally, choice D is incorrect as the random walk hypothesis is in fact an accepted theory in finance.

The Random Walk Hypothesis Suggests That