An econometrician, a technical analyst, and a quantitative analyst are invited to a party hosted by Mart N. Gail. The econometrician observes 2 different stocks, and proposes an econometric time series model for each. The technical analyst observes stocks A and B, and proposes a technical trend. The fixed income quant observes 2 bonds, and proposes stochastic behavior for each.

Question 3

The technical analyst proposes in Stock A there is momentum in the prices. You know for a fact this stock price is a martingale. Can the analyst be correct? Explain why or why not.