How is random walk related to permanent income hypothesis?

The random walk theory suggests that changes in asset prices or income are unpredictable and follow a stochastic process, meaning future price movements are independent of past movements. In the context of the Permanent Income Hypothesis (PIH), which posits that individuals base their consumption on expected long-term average income rather than current income, the random walk implies that individuals adjust their consumption patterns based on new, unexpected information about future income. Thus, both concepts emphasize the unpredictability of income and consumption decisions, affecting how individuals plan their financial futures.