| | | It's not just a substitute term for technical analysis.
Looking at a stock chart, you might see fluctuating stock prices and determine from some low price point and volume that the stock might, or is, reverting to a higher price, and thus is at a buy point. Technical analysis.
In my usage, reversion-to-mean, is looking at a chart or table of historical book values, and/or price/sales rations, and/or p/e's, or other metrics. Then comparing that to current metrics, and making an assessment of the company's current situation, and guestimating whether the situation for the company might improve to where the company will again be viewed by the metrics it's had in the past. |
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