Stock Market: The Art and Science of Regression to Mean
Hi, everyone ! It’s me again, back with another deep dive into the fascinating world of stock markets and investing. Today, we’re exploring a concept that’s like the heartbeat of the stock market : regression to the mean . Think of it as the market’s way of finding balance, much like the ebb and flow of tides along seashores or the predictable shift of seasons. Markets go up, they go down, they swing wildly at times, but over the long haul, they tend to settle back to a baseline (or so-called regression to the mean) . Let’s unpack this idea, explore its historical roots, and determine how we can apply it to make more informed investment decisions. What Is Mean Reversion, and How Do Investors Use It? <source:Investopedia.com> How Applying Regression To The Mean Can Improve Investment Performance <source:Forbes.com> The Cyclical Nature of Markets Markets, like so many things in life, move in cycles. Picture the economy, credit flows, o...
