Understanding Regression Towards The Mean
The Incerto Podcast
Regression Towards the Mean
Regression towards the mean is best understood over long time horizons. Think about how regression to the mean could be understood through the prism of financial markets. Warren buffet insists that you should buy the s am p 500 and just hold for a lifetime, and your return would be significantly better than many iterations of short term speculation. If you back away from that five year time line and then map yourself onto the 200 year time line of the financial market, you actually would have been experiencing out lier returns if you had invested in thee specific stocks. The same can be said for the market a bubble pre two thousand eight g f c or the crypto run of two thousand and 20.
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