Several writers have helped to popularize the notion that stock prices follow no discernible pattern. What is meant by a random walk, and how can you explain why people continue to invest in stocks if the random walk theory is correct?

The random walk theory holds that stock prices cannot be predicted with any certainty. Although evidence supports the random walk idea, stocks have tended to move to higher values over time. So while the short-term walk may be random, the long-term trend is still up and the return generally higher than other alternatives, such as bonds or savings accounts.