Random Walks in Finance and Physics

Part of the Texts and Monographs in Physics book series (TMP)


The Introduction, Chap. 1, suggested that there is a resemblance of financial price histories to a random walk. It is therefore more than a simple curiosity that the first successful theory of the random walk was motivated by the description of financial time series. The present chapter will therefore describe the random walk hypothesis [28], as formulated by Bachelier for financial time series, in Sect. 3.2 and the physics of random walks [29], in Sect. 3.3. The mathematical description of random walks can be found in many books [30]. A classical account of the random walk hypothesis in finance has been published by Cootner [7].


Brownian Motion Random Walk Osmotic Pressure Asset Price Price Change 
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© Springer-Verlag Berlin Heidelberg 2005

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