If a share price falls on four consecutive days of trading,share prices:
A) cannot be following a random walk
B) can still be following a random walk
C) are almost certain to decrease the next day
D) are almost certain to increase the next day

Question

Quizplus · Accepted Answer

A random walk is a mathematical model commonly used to simulate share prices because it assumes that share prices are unpredictable and follow a random path. Therefore, a share price can fall on consecutive days and still follow a random walk. The previous days' price movements have no impact on the future direction of the share price in a random walk model.

If a Share Price Falls on Four Consecutive Days of Trading,share