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Posts Tagged ‘Mean reversion’

Equity analysts overoptimistic

Posted in About, Stocks, Value Investment, tagged , on May 27, 2010 | 3 Comments »

A lesson on the perils of projecting earnings from the Harvard Business Review’s The Daily Stat: For the past quarter century, equity analysts’ earnings-growth estimates have been almost 100% too high. Their overoptimistic projections have generally ranged from 10% to 12% annually, compared with actual growth of 6% (excluding the spike in growth from 1998–2001), [...]

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ROIC and reversion to the mean: Part 3

Posted in About, Behavioral economics, Contrarian investment, Net Current Asset Value, Net Quick Stocks, Net Quick Value, Stocks, Value Investment, tagged , on April 27, 2010 | Leave a Comment »

Recently I’ve been discussing Michael Mauboussin’s December 2007 Mauboussin on Strategy, “Death, Taxes, and Reversion to the Mean; ROIC Patterns: Luck, Persistence, and What to Do About It,” (.pdf) about Mauboussin’s research on the tendency of return on invested capital (ROIC) to revert to the mean (See Part 1 and Part 2). Mauboussin’s report has significant [...]

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ROIC and reversion to the mean: Part 2

Posted in About, Stocks, Value Investment, tagged , , on April 22, 2010 | 3 Comments »

Yesterday I discussed Michael Mauboussin’s December 2007 Mauboussin on Strategy, “Death, Taxes, and Reversion to the Mean; ROIC Patterns: Luck, Persistence, and What to Do About It,” (.pdf) about Mauboussin’s research on the tendency of return on invested capital (ROIC) to revert to the mean. Mauboussin’s report has three broad conclusions, with significant implications for modelling: [...]

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ROIC and reversion to the mean: Part 1

Posted in About, Stocks, Value Investment, tagged , on April 21, 2010 | 7 Comments »

In Michael Mauboussin’s December 2007 Mauboussin on Strategy, “Death, Taxes, and Reversion to the Mean; ROIC Patterns: Luck, Persistence, and What to Do About It,” (.pdf) Mauboussin provides a tour de force of data on the tendency of return on invested capital (ROIC) to revert to the mean. Much of my investing to date has been based [...]

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5 contrarian candidates for mean reversion

Posted in About, Contrarian investment, Stocks, Value Investment, tagged , on March 9, 2010 | Leave a Comment »

Mean reversion is a favorite investment topic here on Greenbackd (see, for example, my posts on Mean reversion in earnings, Contrarian value investment and Lakonishok, Shleifer, and Vishny’s Contrarian Investment, Extrapolation, and Risk). The premise of contrarianism is mean reversion, which is the idea that stocks that have performed poorly in the past will perform better [...]

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Mean reversion in earnings

Posted in About, Contrarian investment, Stocks, tagged , on January 15, 2010 | 9 Comments »

One of the most fascinating examples of the phenomenon of mean reversion was identified by Werner F.M. DeBondt and Richard H. Thaler in Further Evidence on Investor Overreaction and Stock Market Seasonality. DeBondt and Thaler examined the relative performance of quintiles of stocks on the NYSE and AMEX ranked according to book value. As an adjunct to the [...]

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