If stock prices follow a random walk,
A) it implies that investors are irrational.
B) it means that the market cannot be efficient.
C) price levels are not random.
D) price changes are random.
E) price movements are predictable.

Question

Quizplus · Accepted Answer

The concept of a random walk in stock prices suggests that price changes are unpredictable and follow no discernible pattern, thus making them random. This is consistent with the efficient market hypothesis, which posits that all available information is already reflected in stock prices, making it impossible to consistently predict future price movements.

If Stock Prices Follow a Random Walk