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Random walk

Definition:

Theory that stock price changes from day to day are accidental or haphazard; changes are independent of each other and have the same probability distribution. For a simple random walk, the best forecast of tomorrow's price is today's price. Related: Mean reversion.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Benchmark

The performance of a predetermined set of securities, used for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy.

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