Black was right: Price is within a factor 2 of Value

17 November 2017

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We provide further evidence that markets trend on the medium term (months) and mean-revert on the long term (several years). Our results bolster Black’s intuition that prices tend to be off roughly by a factor of 2, and take years to equilibrate. The story behind these results fits well with the existence of two types of behaviour in financial markets: 'chartists', who act as trend followers, and 'fundamentalists', who set in when the price is clearly out of line. Mean-reversion is a self-correcting mechanism, tempering (albeit only weakly) the exuberance of financial markets.


Philip Seager , Yves Lempérière , Stefano Ciliberti , Adam Majewski , Kevin Ronia , Jean-Philippe Bouchaud