Zest Invest: Five-year Mean-reversion

Financials tend to revert to a mean around a 5-year period 12/30/08

Text: Notes | 30DEC08
Elsewhere: CAPS | 5-year lows | 5-year highs

Notes

This paper, a little fuzzy in the details, echoes something that other research has found. Mean-reversion after about 5 years is fairly common. It also finds a higher tendency to revert to the mean in small-cap value stocks:

http://raddr-pages.com/research/MeanReversion.htm

James P. O'Shaughnessy, in What Works on Wall ST, also found support for 5-year mean-reversion. (Betting on one-year mean-reversion was a very bad strategy, however.)

30DEC08

* 5-year lows on DEC 31, 2008
VSH, PONE, RDWR
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