mean reversion Definition

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mean reversion

Definition 1
The theory that a given value will continue to return to an average value over time, despite fluctuations above and below the average value. This theory can be applied to any measurable value, including interest rates and the return on a certain investment.

Definition 2
A purchasing strategy based on the above theory, which assumes that prices will return to an average value. This strategy encourages purchasing underperforming securities, under the premise that the market will eventually rebound, and the value of the security will increase.

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mean reversion is in the Economy and Strategies subjects.

mean reversion appears in the definitions of these other terms on BusinessDictionary.com

Cox, Ingersoll, Ross Option-Pricing Model

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