Several Writers Have Helped to Popularize the Notion That Stock

question 26

Essay

Several writers have helped to popularize the notion that stock prices follow no discernible pattern.What is meant by a random walk, and how can you explain why people continue to invest in stocks if the random walk theory is correct?

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Definitions:

Fixed Costs

Costs that do not change with the level of output produced, such as rent, salaries, and loan repayments.

Short Run

A period in which at least one of a firm's inputs is fixed and cannot be changed.

Monopolistically Competitive

A market structure with many firms selling products that are substitutes but differentiated enough that each firm's product has its own demand.

Fixed Costs

Costs that do not vary with the level of output or business activity, such as rent, salaries, and loan payments.