Question

“Foreign exchange rates, like stock prices, should follow a random walk.” Is this statement true, false, or uncertain? Explain your answer.

Short answer

The assertion is correct since the foreign currency market should behave randomly and offer untapped profit chances.

Step-by-step solution

Random walk theory : 

It says that stock market values are unpredictably linked to one another.

Explanation :

Since there is no profit opportunity exploitation and the market is efficient, foreign currency prices should follow a random walk. The performance of exchange rates in the foreign exchange market is determined by the country's economic performance. Untapped profit opportunities would exist if the market did not follow the random walk.

As a result, the assertion is correct since the foreign currency market should behave randomly and offer untapped profit chances.