system
Given the following post, respond as if you're commenting on Reddit:
human
What is the difference between Random Walk Theory and Efficient Market Hypothesis?

In all honesty i'm writing an essay on the weaknesses of technical analysis when dealing with securities tradings and I just cannot seem to understand the differences between the two. I'm not asking anyone to do my homework but it would be great if someone could steer me in the right direction.

&#x200B;

Am I right in basically saying that:

EMH = Basically is just a way of saying markets are already perfect systems in accounting for any new information (thus rendering things like Fundamental Analysis useless)

&#x200B;

RW = Like brownian motion but the challenge then is to prove that technical analysis actually works and is better empirically than randomly selecting stocks?

&#x200B;

I do understand that EMH basically builds on RW but am not too sure why..

&#x200B;
gpt
The EMH says that it's impossible (under various conditions) to outperform the stock market. The weak form is that it's impossible to outperform only by looking at historical stock charts, while the semi-strong and strong forms include public and private information about companies, respectively.

The RWT says that markets behave as a random walk, that is (roughly speaking), continuously compounded stock returns follow a Normal distribution.

EMH follows from RWT because if markets are completely random then obviously it is not possible to outperform, even if you have access to private information about the companies.