Mean reversion refers to the fact that
A)small firms have higher than average returns.
B)stocks that have had low returns in the past are more likely to do well in the future.
C)stock returns are high during the month of January.
D)stock prices fluctuate more than is justified by fundamentals.

Question

Quizplus · Accepted Answer

Mean reversion refers to the tendency of stocks that have had low returns in the past to have higher returns in the future, and vice versa. This is based on the belief that stock prices will eventually move back towards their average or "mean" over time.

Mean Reversion Refers to the Fact That