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Random walk |
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Random walkThe theory espoused by French Mathematician Louis Bachelier in 1900 which posits that past share prices are of no use in predicting future prices.According to the theory, share prices reflect reactions of the market to information being fed into the market completely randomly. Since the information is coming in randomly, the price movements they cause are no more predictable than the steps of a drunk.Random walk theory is diametrically opposed to technical analysis. The theoretical underpinning of technical analysis is that markets react in a consistent way to share price movements. By looking at charts of past price movements, investors can identify patterns which have occurred before, and can anticipate future price movements because the market tends to react in the same way.Random walkTheory that stock price changes from day to day are accidental or haphazard; changes are independent of each other and have the same probability distribution. Many believers in the random walk theory believe that it is impossible to outperform the market consistently without taking additional risk.Random walk Similar MatchesRandom variableRandom variableA function that assigns a real number to each and every possible outcome of a random experiment. Normal random variableNormal random variableA random variable that has a normal probability distribution. Random variableRandom variableAn economic or statistical variable that takes on multiple (or a continuum of) values, each with some probability that is specified by a probability distribution (or probability density function). Continuous random variableContinuous random variableA random value that can take any fractional value within specified ranges, as contrasted with a discrete variable. Discrete random variableDiscrete random variableA random variable that can take only a certain specified set of individual possible values-for example, the positive integers 1, 2, 3, . . . |
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