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	Random walk hypothesis - Wikipedia, the free encyclopedia
		The random walk hypothesis is a financial theory (it has been described as 'jibing' with the efficient market hypothesis), stating that market prices evolve according to a random walk and thus cannot be predicted.
		The term was popularized by the 1973 book, "A Random Walk Down Wall Street", by Burton Malkiel, currently a Professor of Economics and Finance at Princeton University.
		They argue that the random walk does not exist and that even the casual observer can look at the many stock and index charts generated over the years and see the trends.
	en.wikipedia.org /wiki/Random_walk_hypothesis (218 words)

	Random Walk
		In this respect, Random Walk is like tossing coins: the fact that one toss comes up heads, or that a sequence of five tosses is composed of all heads, has no implications for what the next toss is likely to be.
		Random Walk Hypothesis has dramatic implications for the typical investor for it implies that optimal investment policies do not depend on historical performance, so that a spell of below-average returns does not require rethinking the wisdom of the optimal policy.
		This aspect of the Random Walk is particularly relevant for long-term investors: under the Random Walk, the risk of an investment, as measured by variance of returns, increases linearly with the investment horizon and is not "averaged out" over time.
	www.users.cloud9.net /~rl/rwalk.htm (1669 words)

	A Non-Random Walk Down Wall Street by Andrew W. Lo [ISBN: 0691057745] - Find Cheap Textbook Prices & Save BIG
		The random walk hypothesis, considered the bedrock of financial theory and modeling, is challenged in this collection of eleven papers by the authors.
		They conclude from their results that the random walk model is not consistent with the behavior of weekly returns.
		They do not conclude though that all financial models based on the random walk hypothesis are invalid, but rather they use the specification test to study various stochastic price processes.
	www.gettextbooks.com /isbn_0691057745.html (1585 words)

	Lo & MacKinlay: A Non-Random Walk down Wall Street: Introduction to Part I (Site not responding. Last check: 2007-10-12)
		Previous studies had been unable to reject the random walk, hence we surmised that perhaps a more sensitive statistical test was needed, one capable of detecting small but significant departures from pure randomness.
		We were all in a collective fog regarding the validity of the Random Walk Hypothesis, but as we confronted the empirical evidence from every angle and began to rule out other explanations, slowly the fog lifted for us.
		Therefore, neither the evidence against the random walk, nor the more recent trend towards the random walk, are inconsistent with the practical version of the Efficient Markets Hypothesis.
	pup.princeton.edu /sample_chapters/lo/part1.html (1380 words)

	Hypothesis testing and the Compass Rose (Site not responding. Last check: 2007-10-12)
		Plotting the daily returns of an asset against the same values lagged one period typically reveals the “compass rose” pattern (Crack and Ledoit 1996), which is pervasive, but not universal in financial markets.
		We extend their work to show how the hypothesis of random walk could be tested in a setting inspired by the compass rose pattern.
		Given the sample size n and the null hypothesis of independence, the expected number of points in ω is h=np.
	alpha.fdu.edu /~koppl/Tuluca.htm (1685 words)

	Geometric random walk
		The stationary and random appearance of this graph suggests that the random walk model is appropriate for the logged series, and it should include a constant term (i.e., positive growth) to account for the trend in the original series.
		The random walk hypothesis was first formalized by the French mathematician (and stock analyst) Louis Bachelier in 1900, and in the past century it has been exhaustively studied and debated.
		The intuition for the random walk hypothesis is a variation on the economist's classical efficiency argument, which holds that a $100 bill will never be found lying on the sidewalk because someone else would have picked it up first.
	www.duke.edu /~rnau/411georw.htm (1967 words)

	Great Rebound, Crash, Long Memory
		When first applied to American data, the VR test typically rejected the random walk hypothesis in favour of positive autocorrelations at short horizons (under one year) and negative autocorrelation at longer horizons, both for stock market indices and individual stocks.
		The post-war data appear to be more consistent with either the random walk model, or with positive autocorrelation (mean aversion) at both short and long horizons.
		The VR test exploits the property of an IID random walk (in log prices) that the variance of the return increases linearly with the time horizon (Q) over which the return is calculated.
	persistence.behaviouralfinance.net /ZhGM00.htm (5727 words)

	Title: Finding Patterns in Wall Street
		Closely related, the Efficient Market Hypothesis claims that the markets are "efficient" and that if there were an opportunity for easy profit, then it would have been exploited immediately, eliminating the opportunity in the process.
		Even so, it seems the general consensus that in the long term, markets (for all practical purposes) do follow a random walk, while at high frequency observation it appears to be the opposite.
		It is a stronger theory than the Random Walk Hypothesis, and market efficiency need not imply that stocks move randomly.
	www.cs.caltech.edu /~boswell/school/core/PredictingWallStreet.html (4478 words)

	Sample Chapter for Lo, A.W. and MacKinlay, A.C.: A Non-Random Walk Down Wall Street. (Site not responding. Last check: 2007-10-12)
		Unlike the many applications of the Random Walk Hypothesis in the natural and physical sciences in which randomness is assumed almost by default, because of the absence of any natural alternatives, Samuelson argues that randomness is achieved through the active participation of many investors seeking greater wealth.
		Indeed, when we first presented our rejection of the Random Walk Hypothesis at an academic conference in 1986, our discussant--a distinguished economist and senior member of the profession--asserted with great confidence that we had made a programming error, for if our results were correct, this would imply tremendous profit opportunities in the stock market.
		Despite the many advances in the statistical analysis, databases, and theoretical models surrounding the Efficient Markets Hypothesis, the main effect that the large number of empirical studies have had on this debate is to harden the resolve of the proponents on each side.
	www.pupress.princeton.edu /chapters/i6558.html (3274 words)

	International Trade and Finance Association Conference Papers (Site not responding. Last check: 2007-10-12)
		A random walk test is performed for weakform efficiency.
		The testing of market efficiency of the market it was used istanbul stock exchange’s daily stock returns for random walk over the period from January-1995 to January-2004.
		The run test is also used as a powerful tool to test of random walk in the stock market indicies.
	services.bepress.com /itfa/15th/art38 (292 words)

	Efficient Markets Hypothesis and Random Walk
		From Random Walks to Chaotic Crashes: The Linear Genealogy of the Efficient Market Hypothesis, This article originally appeared in 62 Geo.
		EVANS, John L., The Random Walk Hypothesis, Portfolio Analysis and the Buy-and-Hold Criterion, 1968.
		The Problem of the Random Walk, a brief letter published in the July 17, 1905, issue of Nature 72 p294.
	www.unc.edu /~eghysels/lectures/ecn386/bibliography.html (3967 words)

	Prof
		The random walk hypothesis makes the strong claim that no past information will predict current price changes.
		The random walk is consistent with a positive price trend (then the random variable just has a positive mean, but is still independently distributed).
		Result: Appears unfavorable to Random Walk hypothesis: if the return last month was 1% higher, you can expect this month's return to be.24% greater.
	www.gmu.edu /departments/economics/bcaplan/e345/MET9.html (980 words)

	African Finance Journal - Vol. 5, No. 1 (2003) (Site not responding. Last check: 2007-10-12)
		This paper investigates the random walk behaviour of stock returns on four African stock markets taking into account the thin-trading effect.
		In testing if stock returns follow a random walk, two simple traditional testing methods, that is, the serial correlation test and the runs test were used.
		There was therefore not enough evidence to accept the hypothesis of a random walk.
	www.ajol.info /viewarticle.php?id=4936 (214 words)

	Handelshøjskolens Bibliotek & IT-Service - Institutional Repository (Site not responding. Last check: 2007-10-12)
		clearly reject the random walk hypothesis at the 2-year horizon, that is, the riskiness of a 2-
		whereas autocorrelation tests of the joint hypothesis that there is departure from random walk
		at all horizons tend to reject the random walk hypothesis and support the mean reversion
	ep.lib.cbs.dk /paper/ISBN/x645057125 (97 words)

	A Simple Specification Test of the Random Walk Hypothesis
		We propose a simple test for the random walk hypothesis using variance estimators derived from data sampled at different frequencies.
		This Hausman--type specification-test exploits the linearity of the variance of random walk increments in the observation interval by comparing the (per unit time) variance estimates obtained from distinct sampling intervals.
		Gaussian random walk and the more general uncorrelated but possibly heteroscedastic random walk.
	ideas.repec.org /p/fth/pennfi/13-87.html (391 words)

	Mahalanobis (Site not responding. Last check: 2007-10-12)
		Much research has been conducted testing random walk behaviour or estimating the form of the return’s variance, how to smooth fat tails or endorse them into prevailing theory.
		However, just the statistical existence of a random walk pattern does not imply that the time series is just a random process.
		If there was no random walk, one could apply statistical methods and find linear trends, wave patterns or something else in the data that would be exploitable.
	mahalanobis.twoday.net /?day=20041123 (4057 words)

	Mahalanobis (Site not responding. Last check: 2007-10-12)
		So you could go on an say: Hey, maybe the variance isn't constant over time but it could still be the case that the increments are independent (under the assumption that the increments are normally distributed this would be the same as saying that increments are uncorrelated).
		Then somebody could claim that the log-price process is pretty close to a random walk.
		In such a world, the Random Walk Hypothesis—a purely statistical model of returns—need not be satisfied even if prices do fully reflect all available information.
	mahalanobis.twoday.net /stories/411646#420360 (891 words)

	Investor Home - The Efficient Market Hypothesis (Site not responding. Last check: 2007-10-12)
		The random walk theory asserts that price movements will not follow any patterns or trends and that past price movements cannot be used to predict future price movements.
		Faced with the inference that they cannot add value, many active managers argue that the markets are not efficient (otherwise their jobs can be viewed as nothing more than speculation).
		Similarly, the investment media is generally considered to be ambivalent toward the efficient market hypothesis because they make money supplying information to investors who believe that the information has value (beyond the time when it initially becomes public).
	www.investorhome.com /emh.htm (1859 words)

	SOAS: (Site not responding. Last check: 2007-10-12)
		The hypothesis that stock market price indices follow a random walk is tested for five European emerging markets, Greece, Hungary, Poland, Portugal and Turkey, using the multiple variance ratio test of Chow and Denning (1993).
		In four of the markets, the random walk hypothesis is rejected because of autocorrelation in returns.
		This contrasts with the results of earlier research, carried out for periods of lower turnover, which rejected the random walk hypothesis.
	www.soas.ac.uk /departments/departmentinfo.cfm?navid=470 (146 words)

	Random walk hypothesis - Definition from Investor Dictionary - Define meaning of the word Random walk hypothesis
		Random walk hypothesis - Definition from Investor Dictionary - Define meaning of the word Random walk hypothesis
		The random walk hypothesis is a financial theory, close to the efficient market hypothesis, stating that market prices evolve according to a random walk and thus cannot be predicted.
		The random walk hypothesis and stock market efficiency (Research paper - School of Economic and Financial Studies, Macquarie University ; no. 59)
	www.investordictionary.com /definition/random+walk+hypothesis.aspx (175 words)

	Random Walk Or Mean Reversion: The Danish Stock Market Since World War I (ResearchIndex) (Site not responding. Last check: 2007-10-12)
		Random Walk Or Mean Reversion: The Danish Stock Market Since World War I (1998)
		Variance ratio tests clearly reject the random walk hypothesis at the 2-year horizon, that is, the riskiness of a 2year investment is significantly less than twice the risk of a 1-year investment.
		Variance ratio tests for 3- and 4-year horizons are not significant under conventional significance levels, whereas autocorrelation tests of the joint hypothesis that there is departure from random walk at all horizons tend to...
	citeseer.ist.psu.edu /631500.html (236 words)

	SSRN-Calendar Based Risk, Firm Size, and the Random Walk Hypothesis by C. Jones
		A model of risk with multiple independent unconditional calendar and non-calendar variance components is used to explain time-varying returns.
		The random walk hypothesis is tested using digital signal processing methods.
		With monthly returns and four year signals the white noise hypothesis is rejected using small sample signal processing methods.
	papers.ssrn.com /sol3/papers.cfm?abstract_id=639683 (234 words)

	Amazon.com: A Non-Random Walk Down Wall Street: Books: Andrew W. Lo,A. Craig MacKinlay (Site not responding. Last check: 2007-10-12)
		A Random Walk Down Wall Street: Completely Revised and Updated Eighth Edition by Burton G. Malkiel
		A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, Ninth Edition by Burton G. Malkiel
		A non-random challenge to the random walk hypothesis, June 7, 2001
	www.amazon.com /exec/obidos/tg/detail/-/0691057745?v=glance (2130 words)

	Forecasting foreign exchange rates: Random Walk Hypothesis, linearity and data frequency (SMEALSearch) - ... (Site not responding. Last check: 2007-10-12)
		This research paper discusses aspects of foreign exchange rate forecasting in terms of the Random Walk Hypothesis (RWH).
		The following forecasting techniques were evaluated for profitability: Random Walks, Exponential Smoothing, AutoRegressive Integrated Moving Average and Artificial Neural Networks.
		Using recent Australian-US dollar data, the research examined the implications, of data frequency and linearity, on the RWH.
	gunther.smeal.psu.edu /11496.html (223 words)

	The Small Firm Effect and the Random Walk Hypothesis: Evidence from the London Stock Exchange Using Markov Chains ... (Site not responding. Last check: 2007-10-12)
		The Small Firm Effect and the Random Walk Hypothesis: Evidence from the London Stock Exchange Using Markov Chains (ResearchIndex)
		The Small Firm Effect and the Random Walk Hypothesis: Evidence from the London Stock Exchange Using Markov Chains (1999)
		@misc{ mills-small, author = "T.C. Mills and et al.", title = "The Small Firm Effect and the Random Walk Hypothesis: Evidence from the London Stock Exchange Using Markov Chains", url = "citeseer.ist.psu.edu/mills99small.html" }
	citeseer.ist.psu.edu /255912.html (500 words)

	Testing the Random Walk Hypothesis: Power Versus Frequency of Observation
		Power functions of tests of the random walk hypothesis versus stationary first order autoregressive alternatives are tabulated for samples of fixed span but various frequencies of observation.
		For a t-test and normalized test, power is found to depend, for a substantial range of parameter values, more on the span of the data in time than on the number of observations.
		"Testing the Random Walk Hypothesis: Power versus Frequency of Observation," NBER Technical Working Papers 0045, National Bureau of Economic Research, Inc.
	ideas.repec.org /p/cwl/cwldpp/732.html (300 words)

	Random Walk Hypothesis
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		First identified by French economist Louis Bachelier (1870-1946) from the study of the French commodity markets, random walk hypothesis asserts that the random nature of commodity or stock prices cannot reveal trends and therefore current prices are no guide to future prices.
		The short-term unpredictability of factors means that they appear to walk randomly on a chart, and the best guide to tomorrow's weather (or stock prices) is today's weather.
	www.economyprofessor.com /economictheories/random-walk-hypothesis.php (110 words)

	SSRN-References Cited 'Calendar Based Risk, Firm Size, and the Random Walk Hypothesis' by C. Jones (Site not responding. Last check: 2007-10-12)
		SSRN-References Cited 'Calendar Based Risk, Firm Size, and the Random Walk Hypothesis' by C. Jones
		Calendar Based Risk, Firm Size, and the Random Walk Hypothesis
		Indicates an electronic document is available from the SSRN eLibrary
	papers.ssrn.com /sol3/RefUsedIn.cfm?abid=639683 (70 words)

	A Non-Random Walk Down Wall Street
		12 Jul 2004 16:03 A Non-Random Walk Down Wall Street
		17 Jul 2004 3:23 A Non-Random Walk Down Wall Street
		The list of links to the book's parts for every one wants to download with Total Commander or wathever tool you use for automatic download and recovery:
	www.edaboard.com /ftopic83653.html (185 words)

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