\u2022This useful decomposition is just a tautology -- it is true by definition of expectation, E(P), and tells us nothing about the process of prices
2. P(t+1) = P* + e(t+1),
where E(P)=P* is a known value that doesn\u2019t
change from day to day
3. P(t+1) = P(t) + e(t+1).
Here, E(P)=P(t) is changing daily. The
expectation for the next-day price is today\u2019s
price (this is called a random walk)
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