The term "random walk theory" was coined by French mathematician Louise Bachelier, who believed that share price movements were unpredictable, much like the steps of a drunk.

However, the theory gained popularity as a result of the work of economist Burton Malkiel, who agreed that stock prices follow a completely random path. As a result, the probability of a share price increasing at any given time is the same as the probability of it decreasing. In fact, he claims that a blindfolded monkey could choose a portfolio of stocks at random that would perform just as well as a portfolio carefully chosen by professionals.

Both random walk theory and the efficient market hypothesis (EMH) agree that outperforming the market is impossible. However, EMH contends that this is because all available information is already priced into the stock price, rather than because markets are in any way disorganised.

The Random Walk Theory, developed in the early 20th century, suggests that stock price movements are unpredictable and follow a random pattern, making it impossible to consistently outperform the market. This theory challenges the idea of market predictability and is rooted in the Efficient Market Hypothesis (EMH), which states that stock prices reflect all available information. French mathematician Louis Bachelier first introduced the concept in 1900, but it gained prominence in the 1960s through the work of economist Eugene Fama. The theory implies that technical analysis and forecasting are futile, as past price movements cannot predict future trends. Instead, it advocates for passive investing strategies, such as index funds, as active trading often fails to beat the market after accounting for costs and risks.