Loading ...The Mean Reversion Theory
18 mars 2010 7:03 - Le buzz immobilier
“The percentage spread (standard deviation) of the annualized return of stocks falls faster than 1/(the square root of N), where N is the number of years. (The variance falls faster than 1/N.)
This is a precise definition of Reversion to the Mean (or Mean Reversion).
If each year’s stock return were totally independent of the past, the standard deviation would fall in accordance with the square root of N. Even if we were to allow for a short-term memory of two or three years (i.e., momentum), independence would still imply this square root of N behavior.” The Mean Reversion Theory
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18 mars 2010 à 1:38