Basic Statistics and Data Analysis

Lecture notes, MCQS of Statistics

Random Walks Model: A Mathematical Formalization of Path

A random walk (first introduced by Karl Pearson in 1905) is a mathematical formalization of a path consisting series of random steps. Some examples may include, (i) the path traced by molecule as it travels in a liquid or gas, (ii) the search path of a foraging animal, (iii) the price of fluctuating stock, and (iv) the financial status of a gambler. All these random steps in example can be modeled as random walks, although they may not be truly random in reality.

Suppose there are a+1 positions are marked out on a straight line and numbered 0,1,2,…,a. A person starts at k where 0<k<a. The walk proceeds in such a way that, at each step there is probability p that the walker goes forward one step to k+1 and a probability q=1-p that the walker goes back one step to k-1. The walk continues until either 0 or a is reached and then ends. In a random walk, the position of a walker after having moved n times is known as the state of the walk after n steps or after covering n stages. Thus the walk described above starts at stage k at step 0 and moves to either stage k-1 or stage k+1 after 1 step and so on.

If the walk is bounded, then the ends of the walk are known as barriers and they may have various properties. In this case the barriers are said to be absorbing implying that the walk must end once a barrier is reached since there is no escape.

A useful diagrammatic way of representing random walk is by a transition or process diagram. In a transition diagram, the possible states of the walker can be represented by points on a line. If a transition between two points can occur in one step then those points are joined by a curve or edge as shown with an arrow indicating the direction of the walk and a weighting denoting the probability of the step occurring. Transition diagram are also known as direct graph.

For small Markov processes the simplest way to represent the process is often in terms of its state transition diagram. In state transition diagram each state (outcome) represents the process as a node in a graph. The arcs in the graph represent possible transitions between states of the process. The arcs are labeled by the transition rates between the states.

Example:  Suppose a meteorologist notices that the weather on a given day seems to depend on the weather conditions of the previous day. He/ She observes that if it is raining one day, then the next day is sunny 60% of the time and rainy 40% of the time; on the other hand if it is sunny, the next day is sunny with probability 30% and rainy with probability 70%. Note that there are two outcomes (i) sunny (ii) rainy in this Markov process. The transition probability between sunny and rainy is 70%, between sunny and sunny is 30%, between rainy and sunny is 60% and between rainy and rainy is 40%. The simple weather forecasting Markov Process in transition diagram is

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Random Walks

Random walks are widely being used in many fields such as Ecology, Economics, Psychology, Computer Science, Physics, Chemistry, and Biology etc. Random walks explain the observed behaviour of processes in all these fields, serving as a fundamental model for the recorded stochastic activity.

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The Author

Muhammad Imdadullah

Student and Instructor of Statistics and business mathematics. Currently Ph.D. Scholar (Statistics), Bahauddin Zakariya University Multan. Like Applied Statistics and Mathematics and Statistical Computing. Statistical and Mathematical software used are: SAS, STATA, GRETL, EVIEWS, R, SPSS, VBA in MS-Excel. Like to use type-setting LaTeX for composing Articles, thesis etc.

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