What is it in finance, what is a random walk?

A random walk is a financial theory of the impact of past or current movements of stock prices or even on whole markets on future movements. This theory basically claims that no matter what happened earlier or is currently underway, these movements cannot be used as a means to determine what will happen in the future. Instead, it is considered unpredictable or accidental on the market and is impossible to try to stay before the current circumstances without taking a higher amount of risk. Proponents of this theory tend to promote a reactive approach to market trends where investors follow what is currently happening and changing course only during the market course.

The theory of random walks received a considerable announcement in 1973, when the concept was listed in the work called "Random Walk on Wall Street, Buron Malkiel.es" by Professor Paul Cootner was released. Over the years, the theory has gained a significant number of supporters who feel the theory is in line with the concept of EFEctual market hypotheses.

While the concept of random walks in the investment markets is considered to be a sound approach in the investment community, it is not without its critics. Those who do not support theory claim that it is possible to accurately assess past movements and current trends and use this data to determine what turns or market in the future. Assuming these predictions are based on the facts concerning previous performance and are interpreted accurately, these critics believe that it is possible to pass before the trend, and perform orders that allow the market to overcome. This is done by careful creation of strategy with to carry out sales and purchases as specific items in time, based on where the market is expected to be at each of these points.

For those who find a random walk through a practical approach to investing, emphasis is placed on a random and often unpredictable path that they canstock prices. The theory states that there is as much chance that prices are very different in the direction of a particular historical point as if they occur in a similar way. It is a random option that forms the basis for the idea to follow rather than trying to escape from the market, and to make orders only because changes in the market will take place rather than trying to predict these shifts in advance.