Mean-Reversion and Market Recoveries:
Stocks Hit Hardest First Tend to Outperform… Will Covid-19 Follow the Pattern?
Do equities that suffer the greatest losses in the initial stages of a major market downturn subsequently outperform during the recovery? Here we examine the 10 largest US equity downturns of the past 38 years along with the current Covid-19 market crisis focusing on the performance of the worst performing quintile during the initial downturn, in the expectation that these names might experience mean-reversion and gain more during the market recovery than they lost at the outset.
||Anthony A. Renshaw, PhD
Director, Index Solutions
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