STOCK PRICE BEHAVIOR AND TRADING.

The article focuses on the random walk theory of stock price behavior which posits that past stock-price movements cannot be used to predict future market prices that would allow traders to profit from the predictions. If stock price movements were to become predictable enough that a profit were possible, proponents of the random walk theory argue that enough market participants would quickly recognize and exploit the pattern. These market participants compete enough to make all non-random fluctuations so small that they cannot be exploited for a profit. As a result, the trader would be as well off with a buy and hold strategy as he would with a mechanical decision rule based upon past price changes.