Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test

@article{Lo1987StockMP,
  title={Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test},
  author={Andrew W. Lo and A. Craig Mackinlay},
  journal={NBER Working Paper Series},
  year={1987}
}
In this paper, we test the random walk hypothesis for weekly stock market returns by comparing variance estimators derived from data sampled at different frequencies. The random walk model is strongly rejected for the entire sample period (1962-1985) and for all sub-periods for a variety of aggregate returns indexes and size-sorted portfolios. Although the rejections are largely due to the behavior of small stocks, they cannot be ascribed to either the effects of infrequent trading or time… 

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