LRreversal · Long term reversal · De Bondt and Thaler (1985)

Long-run reversal

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1929Q1 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

0.22%

95% interval −0.88% to 1.30%

Next year

0.20%

95% interval −0.95% to 1.38%

Next five years

0.14%

95% interval −1.27% to 1.59%

Next quarter

−1.19%

95% interval −2.81% to 0.82%

Next year

−0.83%

95% interval −2.47% to 0.98%

Next five years

0.21%

95% interval −1.62% to 1.88%

Next quarter

−0.57%

95% interval −2.27% to 1.06%

Next year

−0.49%

95% interval −2.16% to 1.08%

Next five years

−0.23%

95% interval −1.90% to 1.37%

Next quarter

−2.31%

95% interval −4.48% to 0.48%

Next year

−1.68%

95% interval −3.86% to 0.83%

Next five years

0.15%

95% interval −2.23% to 2.39%

Cumulative market-adjusted return

−86% since 1929Q1 · log scale

Window	Mean	Vol.	Sharpe	t
1929Q1–2024Q4	0.42%	23.13%	0.02	0.18
2020Q1–2024Q4	8.73%	34.69%	0.25	0.56
2024Q1–2024Q4	−12.31%	31.35%	−0.39	−0.39
1929Q1–2024Q4	3.49%	24.57%	0.14	1.39
2020Q1–2024Q4	−2.81%	25.81%	−0.11	−0.24
2024Q1–2024Q4	−22.98%	16.77%	−1.37	−1.37
1929Q1–2024Q4	−0.45%	28.63%	−0.02	−0.16
2020Q1–2024Q4	−6.12%	42.89%	−0.14	−0.32
2024Q1–2024Q4	−31.25%	26.02%	−1.20	−1.20
1929Q1–2024Q4	5.31%	31.70%	0.17	1.64
2020Q1–2024Q4	−10.15%	30.57%	−0.33	−0.74
2024Q1–2024Q4	−38.65%	19.93%	−1.94	−1.94

Horizon	Mean	95% interval	P(neg)
Next quarter	0.019	−0.076 – 0.113	0.34
Next year	0.017	−0.083 – 0.119	0.37
Next five years	0.012	−0.110 – 0.138	0.42
Next quarter	−0.098	−0.233 – 0.066	0.89
Next year	−0.068	−0.203 – 0.080	0.83
Next five years	0.017	−0.132 – 0.153	0.40
Next quarter	−0.040	−0.160 – 0.074	0.75
Next year	−0.034	−0.151 – 0.076	0.72
Next five years	−0.016	−0.133 – 0.096	0.60
Next quarter	−0.148	−0.289 – 0.030	0.95
Next year	−0.107	−0.247 – 0.053	0.91
Next five years	0.010	−0.141 – 0.151	0.44