III. Some causes and consequences of dependence and independence in the stock market

The fact that there are times when market movement is random and times when it is not is interpreted in terms of the hypothesis that the price of a stock is an aggregate opinion — the resultant of the opinions and decisions of a community of investors. Price, like any other opinion, will be most vulnerable to social and other sources of influence during times of uncertainty, an aggregate psychological state which can generate the kind of statistical dependence characteristic of non-random walks. Ramifications of this hypothesis are explored in a variety of stock market behaviors, such as the effect of tips, the impact of runs on trading volume during rising and falling markets, and the like.