STOCK MARKET PRICES AND THE RANDOM WALK HYPOTHESIS

Abstract

The aim of a stock market reform is to build a central market where orders in a competitive market setting may be executed at the best price. A consolidated tape, a consolidated quota system and competitive commission rates are the necessary measures. The random walking hypothesis shows that stock price changes are equally distributed and independently. It thus supposes that it is impossible to anticipate the future movement with the previous stock or market price or movement or trend. In short, the modified hypothesis states that stocks travel a random and imprevisible path, making all stock price prediction methods in the long run useless.