Question

Why can stock prices be modeled with a random walk?

Answer 1

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$\textbf{Explanation:}$

The random walk theory suggests that changes in stock prices have the same distribution and are independent of each other, therefore, the past movement or trend of a stock price or market cannot be used to predict its future movement. In short, this is the idea that stocks take a random and unpredictable path.

Answer 2

Explanation:

The random walk theory suggests that changes in stock prices have the same distribution and are independent of each other, therefore, the past movement or trend of a stock price or market cannot be used to predict its future movement. In short, this is the idea that stocks take a random and unpredictable path.