A Random Walk Down Wall Street Book Cover

A Random Walk Down Wall Street

The Time-Tested Strategy for Successful Investing.
Publishing Year: 1973
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Random walk theory holds that short-term and mid-term price movements of a specific stock appear to be random and thus are unpredictable. Using a share price’s past movements, for example, is an unreliable means of projecting its future direction. Understanding the random walk theory can help retail investors focus their investment strategy. In this insight, we will trace the trajectory of developments in investing and explore some major models that guide investing strategies. The lessons in the insight will provide the reader with a comprehensive idea about the stock market and investing, to enhance the wealth possessed by them.

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Lesson 1- Random Walk and the Share Market

The term “random walk” describes the seemingly random movement of a variable. It doesn’t have any known relationship with historic values or other variables, nor does it have any identified pattern. The variable simply changes, and then changes again. There may be a pattern or relationship of the variable’s movement to some other factor or factors. However, such a pattern or relationship has not been identified.

A share price, which is the variable, moves seemingly at random, akin to how a drunken person might walk down the street. It doesn’t have any known relationship with historic values or other variables, nor does it have any identified pattern. However, the theory does not exclude the possibility that a share price’s movement conforms to a pattern or has a relationship to other factors. Most proponents of the random walk theory apply it to short and mid-term trading. They don’t argue that long-term values move unpredictably. Those follow trends. However, daily, weekly, and even monthly stock prices have no consistent basis for prediction.

All investment returns, whether from common stocks or exceptional diamonds, are dependent on future events. It is a gamble whose success depends on an ability to predict the future.  Traditionally there have been two approaches to asset valuation: the firm-foundation theory and the castle-in-the-air theory. The firm-foundation theory argues that each investment instrument, be it a common stock or a piece of real estate, has a firm anchor of something called intrinsic value, which can be determined by careful analysis of present conditions and prospects. The castle-in-the-air theory of investing concentrates on psychic values. In other words, professional investors prefer to devote their energies not to estimating intrinsic values, but rather, to analysing how the crowd of investors is likely to behave in the future and how during periods of optimism they tend to build their hopes into castles in the air.

An interesting fact about investing is that it is fun. It is fun to put your intellect against that of the vast investment community and to find yourself rewarded with an increase in assets. It's exciting to review your investment returns and to see how they are accumulating at a faster rate than your salary. And it's also stimulating to learn about new ideas for products and services and innovations in the forms of financial investments. 

Lesson 2- Models for Prediction

Investors have always been interested in the strategies that attempt to predict the future course of stock prices, and thus, the appropriate time to buy or sell a stock. Two methods dominate the prediction scene, that is, technical and

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Chapter List
  • Lesson 1- Random Walk and the Share Market
  • Lesson 2- Models for Prediction
  • Lesson 3- Growth since the 1960s
  • Lesson 4- The Dawn of A New Era
  • Lesson 5- Global Recession: What Really Happened?
  • Lesson 6- Global Recession: Bubble Burst
  • Lesson 7- Cryptocurrency Bubble and its Future
  • Lesson 8- Suggestions for the Reader
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FAQs

In the summary of A Random Walk Down Wall Street book, there are 8 key lessons. These lessons include:

  1. Lesson 1- Random Walk and the Share Market
  2. Lesson 2- Models for Prediction
  3. Lesson 3- Growth since the 1960s
  4. Lesson 4- The Dawn of A New Era
  5. Lesson 5- Global Recession: What Really Happened?
  6. Lesson 6- Global Recession: Bubble Burst
  7. Lesson 7- Cryptocurrency Bubble and its Future
  8. Lesson 8- Suggestions for the Reader

A Random Walk Down Wall Street by Burton Malkiel was published in 1973.

Once you've completed A Random Walk Down Wall Street book, We suggest reading out Nobel Prize Winner on Rethinking Poverty (and Business) as a great follow-up read.

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In the printed version of A Random Walk Down Wall Street book have over 300 pages and usually takes 8-10 days to finish. However, with the Wizdom app, including its summary and audiobook, it can be completed in just 15 minutes.

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