As far as bearish sentiment rising, it may simply represent a reversion to the mean.
There is a reversion to the mean return, but it requires a long enough investment period to revert.
The rebound in pessimism was a reversion to the mean for bearish sentiment, which signals that worries about the economy have not faded.
The edges lie elsewhere, and based upon what the statistics show over and over again, it's in a reversion to the mean in short-term stock prices.
If markets were truly efficient, price-earnings ratios should be lower than average at the top of the cycle, since investors should anticipate a reversion to the mean.
Though this does somewhat reflect a reversion to the mean, it also shows that some investors are becoming less enthusiastic about the short-term direction of the stock market.
This is due to a combination of factors, including concerns that the market may have gotten ahead of itself on a short-term basis, the increasing possibility of sequestration occurring and a reversion to the mean.
FORBES: AAII Sentiment Survey: Bears Come Out Of Hibernation
The current poor performance of stockmarkets reflects, of course, a reversion to the mean after the excesses seen during the dotcom bubble, when the rolling 25-year annual return of US equities reached a remarkable 16%.
Difficult though it is to be guided by reversion to the mean, there is something that sticks in the craw about devoting so much of a portfolio to the best-performing asset in recent history.
ECONOMIST: Property��s strong run is not represented in portfolios
Since Apple has not participated in the strong market rally, based on the mean reversion theory, a strong case can be made to buy Apple here.
FORBES: Disappointing Sales At Foxconn Fail To Bruise Apple Stock For Now
From a technical standpoint, there is the potential for mean reversion, or the return of the VIX to historical levels.
FORBES: U.S. Stock Futures Higher After Fed; Netflix Upgraded to Buy at Citi
This lag sets the stage for a possible strong rally in gold equities relative to bullion once mean reversion to historical levels kicks in, just like it has done time and time again.
FORBES: Gold Stocks Look Like Diamonds In The Rough With Metal Making New Highs, Stocks Slumping
Philosophers and mathematicians can debate what causes mean reversion, but in the case of the markets, it seems to be a "wisdom of crowds" phenomenon--the historic return represents the prices investors put on future corporate earnings, which tend to climb in the long run.
应用推荐