Difference between random walk and white noise

White noise is stationary, perhaps trivially so. Random walks, even if there's zero mean, are not stationary. The variance grows with time.

1. How do you detect random walk and white noise?
2. What is a white noise in time series?
3. What is the difference between random walk and random walk with Drift?
4. What is meant by random walk?

How do you detect random walk and white noise?

So, how do we detect a random walk when a visualization is not an option? If you plot the first-order difference of a time series and the result is white noise, then it is a random walk.

What is a white noise in time series?

A time series is white noise if the variables are independent and identically distributed with a mean of zero. This means that all variables have the same variance (sigma^2) and each value has a zero correlation with all other values in the series.

What is the difference between random walk and random walk with Drift?

A random walk with drift is a purely random walk, plus a constant. Random walk with drift will change the trajectory over time. b. Since a random walk with drift has a constant applied to the equation, the price deviations will be larger than those for a purely random walk.

What is meant by random walk?

random walk, in probability theory, a process for determining the probable location of a point subject to random motions, given the probabilities (the same at each step) of moving some distance in some direction. Random walks are an example of Markov processes, in which future behaviour is independent of past history.