Sentences with phrase «on reversion to the mean»

Whether you are leaning towards a style of value investing focused on reversion to the mean or the one focused on finding underappreciated compounders of capital, you will need to be able to understand what the future economics of the underlying business are likely to be.

Can you invest solely relying on reversion to the mean?

Not exact matches

I thought the things I read explained mean reversion quite clearly, but I wasn't entirely clear on how to implement momentum investing

If you apply the principle of mean reversion, history appears to favor China landing on top during this Year of the Dragon.

From a «consensual positioning» perspective which touches on this current «mean - reversion dynamic in the marketplace: say this big bond rally were to gather steam into a much more punishing squeeze of the «all - time» UST short base (largely due to the previously mentioned lack of «tolerance» for beginning of year performance pain).

Bogle, 87, called me from his Vanguard office at Valley Forge, Pa., on Wednesday to discuss the hedge - fund redemptions, which he attributes to a surge of competition in the sector and the inevitable «reversion to the mean» for returns.

For more on standard deviation and mean reversion, I invite you to download my whitepaper, «Managing Expectations: Anticipate Before You Participate in the Market.»

Gummy's (Peter Ponzo's) web site Gummy's Tutorial on Mean Regression Reversion to the mean DOES exist.

I continue to believe that rates will have to go up (e.g. reversion to the mean, reduce the «real» value of $ 20T in US debt, expiration of «conspiracy theory» suggesting the Fed held rates on the floor until the election to get Hillary elected, etc, etc)....

(Note for wonks: I estimated the mean reversion level (which is very close to the historic mean, no surprise) by regressing the one - day lagged Old VIX on the Old VIX itself.

However, if we stick to the base rates on fundamentals, we get a much lesser mean reversion than we get in stock market returns.

A company with a high return on net assets ratio, profit margin, or asset turnover relative to its industry median tends to have greater mean reversion in these measures.

Some would call this a «rebalancing bonus» — a way to capitalize on «reversion to the mean.»

The process of mean reversion is built on the presumption that the underlying distribution (whether it be a time series or cross sectional) is stationary and that while there may be big swings from year to year (or from company to company), the numbers revert back to a norm.

Two concepts that support buying stocks on dips are reversion to the mean and market sentiment.

My previous post The Health of Stock Mean Reversion: Dead, Dying or Doing Just Fine generated good reader's suggestions on other ways to check on mean reversioReversion: Dead, Dying or Doing Just Fine generated good reader's suggestions on other ways to check on mean reversionreversion health.

On reflection, i suspect then that the above graph doesn't just capture mean - reversion in CAPE, but also mean reversion in the other factors contributing to total return — inflation, dividends, and growth rates.

Granted, such a prediction would be entirely pinned on the assumptions of mean reversion (to 6 % growth p / a, and to a CAPE of 15), but it might provide an alternative (or at least discussion worthy) means of testing the predictions of the model.

As for the Treasury market — the yield on the securities will always serve as an aid to mean - reversion, and if there is no fundamental change, it will happen quickly.

Mean - reversion is involved in value investing, in the sense that return on equity for firms tends to mean - revert over time.

Most of the explanations we have discussed for the rise in the CAPE ratio are inherently temporary and are subject to the risk of mean reversion The CAPE naysayers tend to focus on the reasons why a high CAPE ratio can support a high return and tend to ignore the reasons this may not be the case.

Rather than rely on past averages to forecast future returns, we use a building - block approach that adds current yield, likely long - term growth in income, and some mean reversion in valuation multiples to create forward - looking returns.

If mean reversion is working on both the long and short side, one would be expect the order of the lines from top to bottom to be green, blue and red.

FWIW, I personally trade a more advanced mean reversion system on and end - of - day basis meaning I don't need to sit in front of a screen.

I remember seeing a study that showed mean reversion in businesses; high margin businesses go back to low - to - average margin, high return on cap goes to normal, high earnings growth peters out to low growth... negative to low growth goes up to average or high growth etc..

I think it would be helpful to post either monthly or quarterly updates to the graphs above, so as to get a gauge on how mean reversion is progressing.

In additon to outperforming most of his peers, his qaurterly letter reveal him to be a smart quantitative investor, who relies on the simple mathematical concept of mean reversion.

Mean reversion is the theory that companies» values on average return to the mean value (the «average price», if you will).

If that's the case, we're at what can be considered a local max for Apple but it's more likely that as time goes by — and random events pile on — things will never to the mean (this is quasi-mean reversion).

To the extent one thinks companies target after - tax returns on capital, there still could be some mean reversion.

The New Yorker has John Cassidy's interview with Richard Thaler, Chicago School economist and co-author (along with Werner F.M. DeBondt) of Further Evidence on Investor Overreaction and Stock Market Seasonality, a paper I like to cite in relation to low P / B quintiles and earnings mean reversion.

Prices of these stocks are likely to reflect the failure of investors to impose mean reversion on growth forecasts.

I've posted here regularly about the implications of mean reversion in elevated profit margins (see, for example, The Temptation To Abandon Proven Models In Speculative and Fearful Markets: Why This Time Isn't Different, What Record Corporate Profit Margins Imply For Future Profitability and The Stock Market, Warren Buffett, Jeremy Grantham, and John Hussman on Profit, GDP and Competition).

Carlisle's work succeeds on two levels: It is both a gripping account of some of the most notable episodes in the history of shareholder activism as well as an instructive guide to profiting from mean reversion and activist opportunities in today's market.

Perhaps investors are better off taking into account mean reversion on a sector by sector basis, given that we do not seem to be looking at a scenario of plummeting earnings that will sink all boats.

This is known as «reversion to the mean» and it's something I expand on significantly in my advanced Forex trading course.

Mauboussin observes that reversion to the mean is a powerful force, and it impacts return on invested capital as it does many other data series.

If you apply the principle of mean reversion, history appears to favor China landing on top during this Year of the Dragon.

My intent with this point is not to introduce a debate on mean reversion, but simply to acknowledge the data we have historically observed across markets.

For us though, based on over two decades of data, the sweet spot for mean reversion equity trading tends to be 3 - 7 days.

My first reaction to this was a sad reminder on how much better mean reversion was in the past.

Yeah I remember watching a video of Greenblatt where this topic came up in the class... one time Greenblatt was actually asked this very question: What about the reversion to the mean in returns on capital (i.e. are you concerned about high ROC companies seeing their returns deteriorate).

Index investors, in aggregate, are likely to realize higher returns because of lower costs and the effect of reversion to the mean on active strategies.

Pure contrarian investing is investing relying solely on the phenomenon of reversion to the mean without making an assessment of value.

This would seem to indicate that, at an aggregate level at least, mean reversion is a powerful phenomenon and a pure contrarian investment strategy relying on mean reversion should work.

Is it possible to observe the effects of mean reversion by constructing a portfolio on a basis other than some indicia of value?

More generally, as first documented by DeBondt and Thaler (1987), a stock, on average, experiences short - term mean reversion on a monthly horizon, then momentum on the horizon of up to a year, and then mean reversion on the horizon larger than a year and strongest over 2 to 3 years.

Historically it has been mean reversion of valuation ratios like price to book and price to earnings which have had the greatest effect on long term equity returns.

By focusing on low PE10 companies I may be able to profit from positive PE mean reversion, i.e. an increase in the PE or PE10 ratio over time.

Reversion to mean makes no sense to me, there are oscillations on many time scales, climate shifts, etc..