liveBook · Manning

Random walk

As explained in Investing for Programmers

A random walk is a stochastic process whose successive movements are determined by random variation rather than a predictable directional pattern.

A random walk describes movement that does not follow deterministic rules. In financial markets, stock prices may show chaotic behavior and lack dependable patterns. section 8.1.3

This view limits what machine learning can infer from historical price data. Global market interactions and mass psychology make prediction more complex and can turn apparently analytical forecasts into speculation. section 8.1.3 section 8.0

Market prediction

The Mr. Market allegory illustrates emotionally unstable price movements, while irrational exuberance and tulip mania show how collective optimism can produce bubbles. section 8.1.3

How Investing for Programmers covers it

How deep it goes
Explains randomness through market psychology and interconnected markets, but stops short of formal stochastic-process mathematics.
Examples
Uses Mr. Market, tulip mania, global market spillovers, and historical stock performance as concrete illustrations.
What you can do after
Evaluate/understand why historical price patterns may provide limited assistance for predicting chaotic markets.
How it connects
Connects random walks with stock prices, machine learning, time series, market psychology, and irrational exuberance.

Also explained in

Compare how 3 books explain random walk →

Related concepts

This explainer was generated by Manning's knowledge graph from the text of Investing for Programmers. The section links point to the parts of the book it draws on.