A Random Walk Down Wall Street

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A Random Walk Down Wall Street
Book Cover Random Walk.jpg
Author Burton Malkiel
Language English
Genre Finance
Publisher W. W. Norton & Company, Inc.
Publication date
1973
Pages 456
ISBN 0-393-06245-7
OCLC 72798896
332.6 22
LC Class HG4521 .M284 2007

A Random Walk Down Wall Street, written by Burton Gordon Malkiel, a Princeton economist, is an influential book on the subject of stock markets which popularized the random walk hypothesis. Malkiel argues that asset prices typically exhibit signs of random walk and that one cannot consistently outperform market averages. The book is frequently cited by those in favor of the efficient market hypothesis. As of 2012, there have been eleven editions.[1] A practical popularization is The Random Walk Guide to Investing: Ten Rules for Financial Success.[2]

Investing techniques[edit]

Malkiel examines some popular investing techniques, including technical analysis and fundamental analysis, in light of academic research studies of these methods. Through detailed analysis, he notes significant flaws in both techniques, concluding that, for most investors, following these methods will produce inferior results over passive strategies.

Malkiel has a similar critique for methods of selecting actively managed mutual funds based upon past performance. He cites studies indicating that actively managed mutual funds vary greatly in their success rates over the long term, often underperforming in years following their success, thereby reverting toward the mean. Malkiel suggests that given the distribution of fund performances, it is statistically unlikely that an average investor would happen to select those few mutual funds which will outperform their benchmark index over the long term.

Alternative view[edit]

In 1984 Warren Buffett gave a speech at Columbia University rebutting Malkiel's book and the Efficient Market Hypothesis. See The Superinvestors of Graham-and-Doddsville. As of 2013 Malkiel has not yet responded, and has ignored Buffett's argument. As Seth Klarman has stated: "Buffett's argument has never, to my knowledge, been addressed by the efficient-market theorists; they evidently prefer to continue to prove in theory what was refuted in practice".

References[edit]

External links[edit]