First of Random Walk behaviors. ·Bottom of Form Till

First time concept
of random walk was introduced in France by Regnault (1863) and later on in 1900
it was further admitted by Bachelier,L. who was the French Mathematician.

Further the concept was strengthened by Cowles (1933), the random nature of the
market prices not allowed investors to make profits more than normal profit of
the market. Further Kendal (1953) ,Cootner (1962) and Samuelson (1965) in their
respective studies found evidences in support of Random Walk behaviors. 

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·Bottom of Form

Till 1960s, Efficient
Market Hypothesis concept was widely researched and discussed, which later
became controversial on the basis that empirical studies shown against the
seasonal anomalies and efficiency in the stock markets.

 

Fama (1965),
explained Efficient Market Hypothesis in his article that efficient markets are
the one where returns are not capitalized by specific pattern trading. The
efficient market hypothesis can be linked with Random walk notion, which states
that random changes can happen in stock prices due to which future prices
cannot be predicted from historical prices. The rationale behind random walk
states that successive prices are independent and are distributed identically
as random variables which implied the changes in price series has no memory and
hence prices cannot be predicted using trends (Fama,1965)

Granger and
Morgenstern and Godfrey (1963) gave the spectral analysis techniques for
testing random walk hypothesis, using the same technique Granger, and
Morgenstern (1964) supported the independent assumptions of the random-walk
model.

 Fama & French (1988); Lo & MacKinlay
(1988); Poterba and Summers (1988) provided contradictory results of random
walk characteristic by introducing behavioural factors and thus concluded that
the returns of the stock market are predictable upto an extent.These results
make random walk and efficient market hypothesis theories debatable.

(Osborne, 1962; Jensen, 1978;
Black, 1986; Poshakwale, 1996; Ko & Lee (1991) studied and claimed that for
random walk hypothesis to hold, it was required that market is showing weak
form of efficient market hypothesis but vice versa is not true. Therefore, this
evidence argued

. Kendal (1953) found that where
market and current stock prices  tend to
follow random walk it means that prices of stocks are mutually exclusive and
not dependent on each other as well as losses and gains.

 Malkiel (2003) suggested that Random Walk is a
term which is loosely used in finance to feature price series where current
price change is random departure from the historical prices. So broadly it can
be implied that randomwalk means that investor who has no information if purchase
a diversified portfolio may obtain a rate of return as closed as achieved by
expert who has information and access to news.

Gupta & Basu (2007) observed
that if the market is strong form of efficient market hypothesis then  the price of stocks will show the estimated
risk and return expected, if assume that all information is available to investors
at that point of time.

Lagoard & Lucey (2008) found
that if the market is efficient strongly by information then it establishes a
strong relationship between activities of stock market and economic growth. On
contrary if market is inefficient that can turn into profit making strategies through
technical analysis and strategies.

Ngene, A.Tah & Darrat (2017)
in their study on new evidence on multiple structural breaks in emerging market
in the presence of sudden and gradual multiple structural breaks, examine 18
emerging markets to check whether they follow random walk or mean reversion
process . The found evidences that multiple structural breaks were present and
the results are consistent with hypothesis of random walk, however when they
used single break tests, rejected the hypothesis.