random walks in economics

In economics, a random walk refers to a process where an asset's future price movement is unpredictable and follows no clear pattern, with each change being independent of past movements. Essentially, today's price is a good predictor of tomorrow's, except for a random, unpredictable component. This concept suggests that stock prices or other economic variables move in a manner similar to a random path, making short-term forecasting challenging. It underpins the idea that markets are efficient, meaning all available information is already reflected in prices, and only new, unpredictable information causes changes.