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I have never heard of regression towards the mean in profits. It certainly doesn't exist for stock prices. You would actually tend to observe trends - the oppos
by ucha 11y ago
I have never heard of regression towards the mean in profits. It certainly doesn't exist for stock prices. You would actually tend to observe trends - the opposite phenomenon. For example, Google would have a 20% increase in profits on one quarter and another similar increase the following quarter but not a sudden loss caused by a regression to the mean.
- jackcarter 11y agoRegression to the mean historical growth of X%, then.
- Terr_ 11y agoAre you thinking of "the mean" as a single fixed scalar value?
- lamontcg 11y agoIn this case, "regression to the mean" is probably the wrong phrase. Generally, though, when a CEO is looking stern and fearful and declaring writedowns and layoffs and erasing the 'goodwill' off of their books one quarter along with huge losses and financial penalties, etc then the next quarter usually isn't quite as big of a shitshow... So the point here would be to buy a stock that has been overly punished and become unfashionable, while the overall business is still sound and will eventually rebound and the stock price should perk up. If true, though, reading the negative emotions of the CEO would be correlated with past performance and it wouldn't be useful to determine if the company really was sound or if the company was actually heading to zero.