The statement that stock prices follow a random walk implies that: Select one: a. Successive price changes are independent of each other b. Successive price changes are positively related c. Successive price changes are negatively related d. The autocorrelation coefficient is positive

(A) Successive price changes are independent of each other

Explanation:

Random walk theory claims that past information and trends cannot be used to predict future price movement of the stocks since as per the theory, stock price movements are unpredictable and walk (move) randomly.

The theory further suggests that stock prices have same distribution and are independent of one another. It means there is no correlation between price movements of two different stocks.

Thus, Stock prices follow a random walk implies that successive price changes are independent of each other.