Market mean reversion takes longer than expected – CFM quants

Research on how long trends last could help avoid fallout from drawdowns like February’s

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Jean-Phillippe Bouchaud: Research driving “another nail in the coffin of efficient market theory”

Quants at investment firm Capital Fund Management have identified that trending asset prices take years to self-correct – a finding that could help systematic investors navigate market turmoil such as that seen in February.

A forthcoming paper authored by six CFM staff says prices tend to trend over a two-year horizon, during which time they are on average between 50% higher and 33% lower than a notional fundamental value. But mean reversion, where prices come fully into line with their long

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