In a recent post, The State of Short Term Mean-Reversion, Marketsci blog highlights how mean reversion strategies have not been working lately:

Do I think short-term MR will stage a comeback? Yes. I think the breakdown over the last few months is tied to the strong protracted rally, but that this slow grind up will come to an end and that short-term MR will again be the play du jour once we get to the other side.

I have experienced this deterioration in my systems (all contrarian of course).

Steve Ellison is more pessimistic:

I too lean toward the contrarian side, but am increasingly wondering whether that is just an irrational behavioral bias. If markets were efficient, there would be no mean reversion except by chance. Why should there be an advantage to mean reversion? Who is the dumb money that will buy high and sell low, now that the [daily rebalancing] ETFs are gone?





Speak your mind


Resources & Links