Mean Reversion — Wapas Average pe Aane ki Tendency

Mean reversion statistical concept hai jo kehta hai ki extreme observations over time apne long-run average ki taraf wapas aati hain. Galton ne 19th century mein pehle yeh observe kiya tha ki tall parents ke bachhe generally unse chhote hote hain aur short parents ke bachhe unse bade. Average ki taraf regression.

Markets mein yeh concept bahut places pe apply hota hai. Stock valuations: jab P/E ratios historically high ho jaate hain, woh eventually normalizehote hain. Volatility: periods of low volatility generally high volatility periods se follow hote hain aur vice versa. Commodity prices: periods of very high prices destroy demand aur increase supply, pushing prices back down.

Pair trading ek popular mean reversion strategy hai. Do closely related stocks ya assets choose karo jaise Reliance Industries aur Indian Oil Corporation. Jab unka spread historically normal level se bahut door ho jaata hai, bet karo ki spread wapas normalize hoga.

Interesting question hai. Mean reversion kehta hai extreme moves reverse honge. Momentum kehta hai recent strong performers continue karenge. Yeh dono simultaneously sach kaise ho sakte hain?

Jawab hai timeframe. Momentum short to medium term pe work karta hai, roughly 1 to 12 months ke holding period pe. Mean reversion very short term pe (minutes to days, especially intraday) aur very long term pe (years) work karta hai.

Ek stock jo 12 months se consistently upar ja raha hai (momentum), kisi particular day mein agar bahut zyada upar chala gaya (short term overextension), toh next day thoda pullback aa sakta hai (short term mean reversion). Dono sach ho sakte hain different time horizons pe.

Sabse bada risk hai ki mean change ho jaata hai. Agar kisi company ka fundamental business permanently deteriorate ho gaya hai, toh uski stock price jo historically high levels pe thi, woh ab nahi aayegi. Woh jo nayi 'mean' hai woh purani mean se bahut neeche hai.

Nokia, Kodak, aur many Indian companies jaise Unitech ka case dekhte hain. Inka jo price historically tha woh 'mean' tha but business fundamentally changed. Mean reversion karne ki koshish yahan kaafi costly rahi hogi.

Dusra risk hai ki position adverse direction mein move karte rehti hai before reverting. Is duration ko strategy sustain karna hota hai, lekin position size aur leverage agar galat hai toh account blow up ho sakta hai before mean reversion hoti hai. Soros ki famous quote hai ki markets irrational longer reh sakte hain than you can remain solvent.