Question Tag: Random Walk Theory

Random walk theory;
The random walk theory is based on the fact that share prices will reflect every available
information such that prices will alter when new information becomes available. The
assumptions include the following:

• All information about a company is available to all potential shareholders;
• The intrinsic value of shares will change to reflect new information available;
• All investors will act rationally;
• There will be no insider dealings.
  (1.5mark for each point up to a maximum of 3 marks)