A martingale has the property that
A) it is inherently unpredictable.
B) the best prediction of its value tomorrow is its value today.
C) the best prediction of its future growth rate is its current growth rate.
D) the best prediction of its value tomorrow can be computed by looking at its past behavior.
E) the best prediction of its value tomorrow can be computed by looking at the past two periods.

Question

Quizplus · Accepted Answer

A martingale is a stochastic process where the conditional expectation of its future value, given the past values, is equal to its current value. This means that the best prediction of its value tomorrow is its value today, making choice B the correct answer.

A Martingale Has the Property That