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Tag Archive: Burton Malkiel


John C. Bogle the renowned name in the mutual funds shared some thoughts long back saying Whatever the form of theA EMH, I know of no serious academic, professional money manager, trained security analyst, or intelligent individual investor who would disagree with the thrust of EMH: The stock market itself is a demanding taskmaster. It sets a high hurdle that few investors can leap.

University of Chicago Professor Eugene F. Fama had performed enough analysis of the ever-increasing volume of stock price data to validate this “random walk” hypothesis, rechristened as the efficient market hypothesis (EMH). Today, the intellectual arguments against the EMH religion are few. The church, however, has three different dogmas. Princeton Professor Burton Malkiel describes them: the weak form (stock price changes over time are statistically independent); the semi-strong form (prices quickly reflect new value-changing information); and the strong form (professional managers are unable to accurately forecast the future prices of individual stocks). Continue reading

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Random Walk Theory

Random walk theory gained popularity in 1973 when Burton Malkiel wrote A Random Walk Down Wall Street, a book imagesthat is now regarded as an investment classic. Random walk is a stock market theory that states that the past movement or direction of the price of a stock or overall market cannot be used to predict its future movement. Originally examined by Maurice Kendall in 1953, the theory states that stock price fluctuations are independent of each other and have the same probability distribution, but, over a period of time, prices maintain an upward trend.

In short, random walk says that stocks take a random and unpredictable path. Continue reading

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