In the short term such markets are, as the phrase goes, a random walk.
Pretty much a random walk in the short term most of the time too.
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The random walk means that nobody should ever be able consistently to beat the market.
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Doesn't this contradict his support for index funds in his book A Random Walk Down Wall Street?
In his 1973 book A Random Walk Down Wall Street, economist and Princeton University professor Burton G.
The case for the random walk argument is that trends can appear in patterns that are actually random.
It was Burton Malkiel, author of A Random Walk Down Wall Street , the classic on efficient financial markets.
Malkiel: It is, and in fact I'm just working on--it'll be out in November--the 10th edition of my Random Walk book.
This suggests a different gait to the random walk in the U.S. than in the U.K. Intrinsically there is an arbitrage opportunity there.
Random walk advocates like Princeton Professor Burton Malkiel say that stocks move randomly from day to day and that technical analysis is foolish.
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How much validity you should assign to PFTH depends on whether you think stock prices move in a chaotic manner or follow a random walk.
Forbes: Can you describe your investment strategy in this type of market, and is it the same strategy that you chronicled in your book A Random Walk Down Wall Street?
Those who adhere to the random walk theory also point out that the timing of new data and news is unpredictable, and that stock prices react quickly to the introduction of new information.
And then finally, the other thing I've always been a big believer in, and Forbes magazine has been a great supporter from the very beginning of my Random Walk book, and that is put your money in low-cost index funds.
Famously, author and investing legend Burton Malkiel suggested in A Random Walk Down Wall Street that you could get monkeys to toss darts at the financial listings in a newspaper and do just as well as a pro stock picker.
Gary Shilling, editor of Insight, looks at the economy and the financial sector and remains a bear with claws, while Burton Malkiel, author of A Random Walk Down Wall Street, counters that trying to predict the market is folly--even though he's a huge bull on China!
He made his big splash in 1973 with his best-selling takedown of stock-picking, A Random Walk Down Wall Street, in which he illustrated the futility of accurately predicting future stock prices, noting how a blindfolded chimpanzee throwing darts at the stock page of a newspaper could pick winners as well as a Wall Street professional.
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To the dismay of active equity managers, the ranks of the random-walk converts are swelling all the time, especially in the United States where passive managers now handle most of the shares in public-sector pension funds.
Authors Guofo Zhou and Yingzi Zu use some complex math based on the random-walk theory to show that the odds of watching half your liquid net worth evaporate are roughly similar to those of another major life event: death.
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