The difference between a random walk and a submartingale is the expected price change in a random walk is ______, and the expected price change for a submartingale is ______.
A) positive; zero
B) positive; positive
C) positive; negative
D) zero; positive
E) zero; zero

Question

Quizplus · Accepted Answer

In a random walk, the expected price change is zero, indicating that future movements are equally likely to be up or down, independent of past movements. For a submartingale, the expected price change is positive, suggesting that future values are expected to be higher, on average, than current values.

The Difference Between a Random Walk and a Submartingale Is