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Beyond mean reversion, selection could also be an explanation. Funds with the worst returns are the funds with the highest risk. And funds with the highest risk
by tedsanders 9y ago
Beyond mean reversion, selection could also be an explanation. Funds with the worst returns are the funds with the highest risk. And funds with the highest risk may have higher expected returns (all else equal). Of course, with this model, past winners would tend to outperform in addition to past losers.