To say that stock prices follow a "random walk" is to argue that
A) stock prices rise, then fall.
B) stock prices rise, then fall in a predictable fashion.
C) stock prices tend to follow trends.
D) stock prices are, for all practical purposes, unpredictable.

Question

Quizplus · Accepted Answer

The random walk theory suggests that future changes in stock prices are effectively random and cannot be predicted based on past trends or patterns. Therefore, option D is the correct answer. Options A and B suggest some predictability or pattern, while option C suggests that there are trends in stock prices, which are contradicted by the idea of a random walk.

To Say That Stock Prices Follow a "Random Walk" Is