When the stock price follows a random walk the price today is said to be equal to the prior period price plus the expected retur
n for the period with any remaining difference to the actual return due to:_________ a. A predictable amount based on the past prices.
b. A component based on new information unrelated to past prices.
c. The security's risk.
d. The risk free rate.
e. None of the above.
When stock prices adhere to a random walk, today's price correlates to the previous period's price plus the anticipated return for that period, with any remaining variance reflecting the actual return attributable to: "new information linked to the stock". This occurrence transpires because any fresh information concerning the stock that doesn't relate to historic prices will result in an adjustment of the stock's price over time.
