Business and Personal Finance Dictionary

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• RANDOM WALK THEORY
  
  The random walk theory holds that it is futile to try to predict changes in stock prices. Advocates of the theory base their assertion on the belief that stock prices react to information that becomes known at random, and that, because of the randomness of this information, prices themselves change as randomly as the path of a wandering person's walk. Supporters of efficient market theory hold a similar belief that market performance can't be predicted, and both schools of thought stand in opposition to technical analysis, which predicts future stock prices based on statistical patterns of prior performance.
  
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