Reversion to the mean is not a new concept and we most recently discussed the principle in a blog, Reversion to the Mean, posted on 11/1/2017. With the popular averages up some 30% in 2019 it might seem logical to expect a sharp reduction in the near future. This may occur, but it is important … Continued
Mean reversion is the theory suggesting that prices and returns eventually move back to the mean or average. This mean or average can be the historical average, or another relevant average, such as growth in the economy. Applying this theory to the major stock market indices, such as the S&P 500 and the Dow Jones Industrial … Continued
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