This video discusses the random walk hypothesis in finance, which posits that stock price movements are unpredictable and independent of past movements. It explores the assumptions behind this hypothesis, such as rational investors and publicly available information, and then delves into reasons why it might not hold true in the real world, including investor irrationality and the potential for price changes themselves to convey information. The discussion then transitions to momentum and reversal investing strategies, which are based on the idea that price changes can be correlated.
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Session 9 (of 42): Random Walks and Momentum
Mar 24, 2026
This video discusses the random walk hypothesis in finance, which posits that stock price movements are unpredictable and independent of past movements. It explores the assumptions behind this hypothesis, such as rational investors and publicly available information, and then delves into reasons why it might not hold true in the real world, including investor irrationality and the potential for price changes themselves to convey information. The discussion then transitions to momentum and reversal investing strategies, which are based on the idea that price changes can be correlated.
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