Random Rant on a random walk

Random Rant on a random walk

When discussing market analysis, we usually consider the two contending schools of thought to the fundamental analysis and technical analysis. However, in the early 1970s, emerged the third known as "random walk theory," which was the approach to market analysis, as was criticism of the other two methods.

In random walk theory is a popular name for the market model known in academic circles as the theory of efficient markets. This model asserts that market prices are "efficient" in the sense that all known information and market expectations are now established in the market through the movement of prices. But these price movements are caused by so many different factors that they become random in nature, and the only thing we can be sure that the current price is exactly one, because it is based on all known information. Can not, under focus, certainly anticipate the movements of prices that keep the market at this point.

This model centers around the efficient market hypothesis, of which there are three versions, the weak, the semi-strong and strong. Regarding the use of analysis techniques to outperform the market consistently, weak version basically says that technical analysis can not work, semi-strong says that neither technical analysis nor fundamental analysis can work, and a strong version says nothing, even and illegal inside information, will work!



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