Random Walks in Finance and Physics
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 , as formulated by Bachelier for financial time series, in Sect. 3.2 and the physics of random walks , in Sect. 3.3. The mathematical description of random walks can be found in many books . A classical account of the random walk hypothesis in finance has been published by Cootner .
KeywordsBrownian Motion Random Walk Osmotic Pressure Asset Price Price Change
Unable to display preview. Download preview PDF.