What is the probability that the portfolios value moves

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Reference no: EM131510835

1. The random walk theory of securities prices holds that the price movements in disjoint time periods are independent of each other. Suppose that we record only whether the price is up or down each year and that the probability that our portfolio goes up for three consecutive years?

2. If you know that the that the portfolio has risen in price two year in a row, what probability do you assign to the event that it will go down next year?

3. What is the probability that the portfolio's value moves in the same direction in both of the next two years?

Reference no: EM131510835

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