What is the evidence for and against mean reversion in academic literature? Refining Mean Reversion Strategies

Stock returns display significant negative serial correlation, in other words, prices are mean reverting. This column reviews some of this evidence. Mean reversion strategies attempt to capture profits as the price of an asset returns to more normal levels, or the average. When considering using a mean ... Jan 6, 2023 ... The existence of a stationary component in stock prices implies that stock returns should revert to their mean returns in the long run. In this ... Aug 28, 2024 ... In practical applications, mean reversion is a popular strategy in algorithmic trading. Traders may buy undervalued assets, anticipating they ... Feb 21, 2012 ... The underlying motivation is to bet on the consistency of positive lagged cross-correlation and negative autocorrelation. It exploits the ... Equity indices exhibit mean reversion in daily returns. A simple and powerful way to capture this effect is the Internal Bar Strength technical indicator, which ... Mean reversion has been empirically observed in many markets, especially foreign exchange and commodities. We show that the slightest mean reversion yields ... Mean reversion strategies involve attempts to generate a profit by trading on an asset as it returns closer to its average and away from an extreme. Traders use ... Jan 27, 2023 ... We examine an array of short-term mean-reversion indicators for global equities. The indicators encompass the most widely known price ... This paper provides the strongest evidence yet that real exchange rates were mean-reverting over the 1973-93 period.