Do you believe in the Random Walk Hypothesis?

Question

Do you believe in the Random Walk Hypothesis?

Answer 1

Well yes and no. I think randomness is fine for those with little time/knowledge of the market without much to lose for others you had better do your research

Answer 2

No.  I don't know why this has any credibility at all.

First.  It assumes that all information is already priced into the market price.  This means that all market participants get the information at the same time, analyze it the same way and come to the same conclusion, and this conclusion is correct.  It also assumes that the information is complete and accurate in the first place.  Management never cooks the books.  Does anybody believe this?

Second.  It is so easy to find examples of trends, where it took the market a long time to react to facts.  The best documented example, but not the only one, is Enron.  Below is a document prepared by Dorsey Wright Assoc.  This was a company that was caught in one fraud after another, and yet professional analysts kept issuing "buy" recommendations.  They didn't all switch to "sell" at the same time.  The details speak for themselves.  My point is, according to Random Walk trends like this can't happen.

Answer 3

Nope, Bachelier was on the side of the irrational market notion, which I reservedly agree with, but commodity (and stocks) are far from random. There may be an enormous amount of irrationality in the individual trading decision-making, but it is purposeful and rarely random.

While it is fun to hear of guys having a blast by throwing darts at a stock listing to choose what to put into a practice portfolio, or chimps marking the page with a highlighting pen, these are flukes that only hit the news, when they happen to match now and then. Most such, as should be, are not correlaries to the market.

Traders and market makers do not flip a coin or use the random number generator on their spreadsheet to determine what to buy or sell. The market randomness may superficially appear random, but the widest representation have causal-type decision making behind trading choices.