The statement that stock prices follow a random walk implies that
A)the correlation coefficient between successive price changes (auto correlation) is not significantly different from zero.
B)successive price changes are positively related.
C)successive price changes are positively related and are negatively related.
D)the autocorrelation coefficient is positive.

Question

Quizplus · Accepted Answer

The statement that stock prices follow a random walk implies that there is no predictable pattern to changes in stock prices, and that successive price changes are independent of each other. This means that the auto correlation between successive price changes should not be significantly different from zero, as there should be no relationship between the price changes. Therefore, choice A is the best answer.

The Statement That Stock Prices Follow a Random Walk Implies