Question

random walk hypothesis of the efficient market theory posits that: (tick correct one )

1. Historical stock price follows a random walk.
2.Stock price volatility follows a random walk.
3.Historical stock return follows a random walk.
4.Short term investment returns are inherently unpredictable​

Answer 1

Explanation:

random walk hypothesis of the efficient market theory posits that: (tick correct one )

1. Historical stock price follows a random walk.

2.Stock price volatility follows a random walk.

3.Historical stock return follows a random walk.

4.Short term investment returns are inherently unpredictable

Answer 2

The correct answer is 2

Explanation:

• The hypothesis of random walk is the theory of financial which states that the market prices of stock evolve in accordance with the random walk ( which means that the changes in price are random) and therefore, cannot be predicted.
• In EMH (Efficient market Hypothesis or theory) is the one which reflect all the important information in relation to the financial assets. This is consistent with random walk.
• And in the EMH, the stock prices volatility follows the random walk.