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In investment the million dollar question is...

The question of when to buy is the heart of every investor.  The two big themes in quantitative investing are momentum (trend following) and value (mean reversion).  The million dollar question is always which method will work now: i.e. should we stay with the trend or is it time to try to catch the falling knife.

Mean reversion investor are typically contrarian.  Common strategy contrarian adopted is to buy what was beaten up last year, and to sell what worked well over the preceding 12 months. 

Historically, on a 12 month basics, mean reversion investor have done exceptionally well only when the technology bubble popped in 2000 or when the financial system recovered from near collapse in 2009.  In other, if you are able to identify the turning point of a major crisis to catch the falling knife - turning point, you will be paid handsomely, as a mean reversion investor.

The rest of the time, mean reversion is not a good strategy. According to Citi Research, selling the ten best performers and buying the ten worst each year out of the 250 largest stocks in the MSCI since 1998, momentum wins as shown below:

 

Why?  One of the possible reasons is that 12 month could be too short to see any meaningful reversals.  You would probably get reversals on a two- to three-year view.  Unless they trade on a very short-term basis, contrarians then might have to spend painful time in the wilderness before they are proved right.

Reference:

Financial Time, Dan McCrum, 2016-01-08, "The Art of Contrarian Investing is in the...timing"