ABSTRACT
MALKIEL’s book, originally published in 1973, provides a detailed examination of the efficient market hypothesis. This theory is associated with the idea of a “random walk”, a term used in the finance literature to characterize a price series in which all subsequent price changes represent random departures from previous prices. Malkiel concluded that a blindfolded chimpanzee throwing darts at the Wall Street Journal could select a portfolio that would do as well as those of the experts. The practical alternative to throwing darts advocated by Malkiel was simply to buy an index fund comprising a widely diversified portfolio of stocks. Malkiel’s book also describes the major academic theories that underpin stock market investment: the concept of intrinsic value, technical and fundamental analysis, growth versus value investing, modern portfolio theory, and the capital asset pricing model.
