Date of Award
Economics and Finance
The phrase, "A Random Walk Down Wall Street" may make a portfolio manager shudder. I first learned about this theory while reading a book of the same name by Burton G. Malkiel. I saw the last four years crashing down around me as I read about the competition I would be facing upon graduation–a blindfolded chimpanzee.
The random walk theorizes that the stock market is so efficient that a blindfolded chimpanzee can throw darts at the Wall Street Journal to select a portfolio of stocks that will perform equally as well as those managed by the experts. Unfortunately for the experts, this theory has held up surprisingly well for over thirty years. The unmanaged S&P 500-Stock Index has produced a greater return than more than two-thirds of portfolios managed by professional portfolio managers. Still, studies have indicated that the market might not be as efficient as the chimpanzee would hope (Malkiel, 1999, p. 15).
Williams, Jill Marie, "The Efficient-Market Hypothesis During a Recession" (2002). Undergraduate Honors Capstone Projects. 860.
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Allen A. Stephens
Departmental Honors Advisor
L. Dwight Israelsen