Brendan Sanford 
According to the random walk hypothesis, in an informationally efficient market, in which participants behave sanely, prices of shares encode all the relevant available information – so that even the best analyst can never improve on prices that are already implicit.
Its supporters say that broad market index funds will deliver optimal performance without compounding, but can this theory stand the test of time?
Fundamental Analysis
In random walk theory, you are claiming that the price of stocks is random and unpredictable; that all information has already been discounted into today’s prices; that you can’t beat the market using technical or fundamental analysis. So it’s an asset class that benefits passive, diversified investment strategies such as index investing.
A drawback of the theory is that it excludes the possibility of forces that could re-infuse securities prices; if a firm offers fast food chicken and the economy collapses, their earnings could go down and their earnings go down.
The objection is also that Malkiel’s theory cannot explain information asymmetries in the market, where investors do have more and better data than others; it might also account for how some fund managers are able to outdo it time and again. Malkiel ran and was published in Wall Street Journal study pitting expert tippers against random dart throwers – they could barely beat them 50% of the time!
Technical Analysis
The Random Walk Hypothesis claims that stock prices cannot be predicted and that no future price movement can be anticipated. It underpins many popular portfolios – buying and holding broad market index funds, for example – but its critics argue that it simplifies an opaque market by failing to recognise real-world inefficiencies such as information asymmetries that are available for wise investors to exploit.
Chartist or technical analysis is one of the most popular methods for predicting stock prices. This strategy makes the presumption that the same will repeat in the future and it enables chartists to identify instances where trading opportunities might arise. Some analysts transcend pure technical analysis to also use other kinds of market projection methods, such as fusion analysis and helps portfolio managers be better.
Market timing
The main problem with Random Walk Theory is that it does not predict patterns or inefficiencies in financial markets. Other economists hold the Efficient Market Hypothesis (EMH), in which market data already encapsulate all relevant information, but other economists believe that markets are not always efficient, and that short-term aberrations are able to be pounced upon by investors making money off short-term anomalies.
Experimental research has confirmed the Random Walk Hypothesis with mixed results. Even though these findings do not directly validate its hypothesis that prices fluctuate in a random way, they do show that there is no consistent pattern to price movements, and therefore predictions about how or when things will happen are mostly meaningless. In light of all this, he should invest rather longer in index funds where return can be predictable and risks can be minimised – not chartsists’ theory of historical events that ought to repeat themselves.
Portfolio Management
Typically investors (investment professionals and banks) try to entrap the market with technical or fundamentals. These sorts of analyses are based on cycles of price action repetition. Any good chartist/fundamental shopper needs to spot this type of trend, and then can correctly forecast any future move to get higher profit opportunities.
Those who subscribe to the random walk model often claim that market prices are just random and that there’s no hope of outsmarting the market; whatever returns from investing bring about will be inexplicable by skill alone.
The random walk hypothesis is directly contradictory to both the weak version of the Efficient Market Hypothesis (EMH) and the semi-strong EMH, which stipulate that current market prices capture every bit of information – including private or secret information – and that this makes any steady outperformance impractical.
