Mean reversion is the idea that stock prices revert to a long term level. Hence, if there is a shock in prices (unexpected jump, either up or down), prices will return or revert eventually to the level before the shock. The time it takes to revert is often referred to as the time to reversion. If the process is very persistent, it might take a long time to revert to the mean. The key difference between a mean-reverting process and a random_walk is that after the shock, the random_walk price process does not return to the old level.
Barry Goldsmith
| APA | Barry Goldsmith. (2010). mean reversion. Retrieved September 23, 2026, from http://smartdefine.org/mean_reversion/definitions/1158036 |
| Chicago | Barry Goldsmith. 2010. "mean reversion" http://smartdefine.org/mean_reversion/definitions/1158036 (accessed September 23, 2026). |
| Harvard | Barry Goldsmith 2010, mean reversion, Smart Define, viewed 23 September, 2026, <http://smartdefine.org/mean_reversion/definitions/1158036>. |
| MLA | Barry Goldsmith. "mean reversion" 21 October 2010. Web. 23 September 2026. <http://smartdefine.org/mean_reversion/definitions/1158036> |