March 11, 2010
Here is a little puzzle that may stymie many a professional trader. Sup- pose a certain stock exhibits a true (geometric) random walk, by which I mean there is a 50â€“50 chance that the stock is going up 1 percent or down 1 percent every minute. If you buy this stock, are you most likelyâ€”in the long run and ignoring financing costsâ€”to make money, lose money, or be flat?
I am interested to see what you guys think the answer is?