random walk hypothesis

The random walk hypothesis suggests that stock prices move unpredictably, similar to a path taken by a person who steps randomly every time. This means past price trends do not reliably forecast future prices because each move is independent and influenced by new, unpredictable information. Essentially, price changes are like a "drunkard's walk," where each step is random and not influenced by previous steps, making future movements impossible to predict accurately based on past data.