The random walk hypothesis
A) implies that security analysis is unable to predict future market behavior.
B) suggests that random patterns appear but only over long periods of time.
C) has been disproved based on recent computer simulations.
D) accounts for market anomalies such as calendar effects.

Question

Quizplus · Accepted Answer

The random walk hypothesis posits that stock market prices evolve according to a random walk and thus cannot be predicted. It implies that past movement or trend of a stock price or market cannot be used to predict its future movement, essentially rendering security analysis ineffective in predicting future market behavior.

The Random Walk Hypothesis