Black was right: price is within a factor 2 of value

CFM’s quants verify Fisher Black’s intuition on mean reversion still applies today


J.-P. Bouchaud, S. Ciliberti, Y. Lempérière, A. Majewski, P. Seager and K. Sin Ronia provide further evidence that markets trend in the medium term (months) and mean revert in the long term (several years). These results bolster Black’s intuition that prices tend to be off by roughly a factor of two and take years to equilibrate

In his remarkably insightful 1986 piece called Noise, Fisher Black (1986) famously wrote: “An efficient market is one in which price is

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