The journal of finan coming of the computer. In 1953 Kendall [21] examined the behavior of weekly changes in nineteen indices of British industrial share prices and in spot prices for cotton(New York) and wheat( Chicago). After extensive analysis of serial correlations, he suggests, in quite graphic ter The series looks like a wandering one, almost as if once a week the demon of Chance drew a random number from a symetrical population of fixed dispersion and added it to the current price to determine the next weeks price [21, p. 13 Kendall's conclusion had in fact been suggested earlier by Working [47] though his suggestion lacked the force provided by Kendall's empirical results And the implications of the conclusion for stock market research and financial analysis were later underlined by roberts [36 But the suggestion by Kendall, Working, and roberts that series of specula tive prices may be well described by random walks was based on observation None of these authors attempted to provide much economic rationale for the hypothesis, and, indeed, Kendall felt that economists would generally reject it. Osborne [33] suggested market conditions, similar to those assumed by Bachelier, that would lead to a random walk. but in his model, independence of successive price changes derives from the assumption that the decisions of investors in an individual security are independent from transaction to transaction-which is little in the way of an economic model Whenever economists (prior to Mandelbrot and Samuelson) tried to pro vide economic justification for the random walk, their arguments usually ple, Alexander [8, P. 200] states If one were to start out with the assumption that a stock or commodity speculation is a"fair game"with equal expectation of gain or loss or, more accurately, with an expectation of zero gain, one would be well on the way to picturing the behavior of speculative prices as a random walk There is an awareness here that the"fair game "assumption is not sufficient to lead to a random walk, but Alexander never expands on the comment Similarly, Cootner [8, P. 232] states If any substantial group of buyers thought prices were too low, their buying would force up the prices. The reverse would be true for sellers. Except for appreciation due to earnings retention, the conditional expectation of tomorrows price, given today's price, is today's price In such a world, the only price changes that would occur are those that result from new information. Since there is no reason to expect that information to be non-ran movements, statistically independent of one another es of a stock should be random dom nce, the period-to-period price cha Though somewhat imprecise, the last sentence of the first paragraph seems to toa“ fair ga econd paragraph can be viewed as an attempt to describe environmental con- ditions that would reduce a "fai to a random walk. But the tion imposed on the information generating process is insufficier pose; one would, for example, also have to say something 吐or