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Some economists believe that stock returns follow a random walk. This means that tomorrow's return could be above or below today's and that these movements
Some economists believe that stock returns follow a random walk. This means that tomorrow's return could be above or below today's and that these movements are unpredictable-theyre random. If the stock market is efficient, a stock's market price reflects existing information quickly and accuretly. Therefore price changes reflect only new information. Why does this imply that prices will follow a random walk when markets are efficient? (Hint: If information is new, is it predictable?)
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