If share prices follow a random walk, it means
A) long periods of declining prices are followed by long periods of rising prices.
B) the greater the number of consecutive days of price declines, the greater the probability prices will increase the following day.
C) share prices are unrelated to random events that shock the economy.
D) share prices are just as likely to rise as to fall at any given time.

Question

Quizplus · Accepted Answer

If share prices follow a random walk, it means that they are equally likely to rise or fall at any given time, and therefore the answer is D. A random walk implies that share prices are not affected by any specific trends or external events, but instead move randomly based on market activity.

If Share Prices Follow a Random Walk, It Means