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Mean Reversion and its Importance in Investing/Trading

Mean reversion applies to different contexts such as economic growth, volatility, and asset returns. Mean reversion in the context of stock returns implies that the returns will eventually revert to the long-run mean.  It implies that periods of above-average performance in stocks will be followed by periods of underperformance and vice versa.  Let’s take the

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Mean Reversion and its Importance in Investing/Trading

Mean reversion applies to different contexts such as economic growth, volatility, and asset returns. Mean reversion in the context of stock returns implies that the returns will eventually revert to the long-run mean.  It implies that periods of above-average performance in stocks will be followed by periods of underperformance and vice versa.  Let’s take the

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