random walk theory

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00:55 Oct 19, 2020
English to Dutch translations [PRO]
Bus/Financial - Economics
Additional field(s): Business/Commerce (general), Economics, Finance (general), Investment / Securities, Mathematics & Statistics
English term or phrase: random walk theory
Definition from The Economist:
Also random walk hypothesis. Impossible to predict the next step. efficient market theory says that the prices of many financial assets, such as shares, follow a random walk. In other words, there is no way of knowing whether the next change in the price will be up or down, or by how much it will rise or fall. The reason is that in an efficient market, all the information that would allow an investor to predict the next price move is already reflected in the current price. This belief has led some economists to argue that investors cannot consistently outperform the market. But some economists argue that asset prices are predictable (they follow a non-random walk) and that markets are not efficient.

Example sentence(s):
  • The most well-known practical example of random walk theory occurred in 1988 when the Wall Street Journal sought to test Malkiel's theory by creating the annual Wall Street Journal Dartboard Contest, pitting professional investors against darts for stock-picking supremacy. Investopedia
  • The random walk hypothesis has merit in dissuading investors from trying to make guesses about short-term stock movements. However, many long-term investors still manage to invest well by putting time on their side. The Motley Fool
  • Malkiel and the random walk theory provide considerable support to the intimidated individual investor, but Malkiel in particular encourages investors to understand the theories and investment methods that the random walk theory challenges. Investing Answers
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Summary of translations provided
Ilona van Leeuwen


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Definition from Wikipedia:
Een toevalsbeweging (Engels: random walk), is een wiskundige formalisering van een traject dat bestaat uit opeenvolgende willekeurige stappen.

Example sentence(s):
  • De toevalsbeweging is een wiskundige formulering die wordt gebruikt ter beschrijving van een reeks uiteenlopende dynamische verschijnselen, zoals de beweging van grote moleculen in een oplossing, het zoekgedrag van dieren, en de financiële gezondheid van een roulettespeler. - Universiteit van Groningen  
Ilona van Leeuwen
Local time: 09:05
Native speaker of: Native in DutchDutch
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