Whitepaper - May 2020

Mean-Reversion and Market Recoveries: Stocks Hit Hardest First Tend to Outperform

Will COVID-19 Follow the Pattern?

Do equities that suffer the greatest losses in the initial stages of a major market downturn subsequently outperform during the recovery? Here we examine the 10 largest US equity downturns of the past 38 years along with the current COVID-19 market crisis focusing on the performance of the worst performing quintile during the initial downturn, in the expectation that these names might experience mean-reversion and gain more during the market recovery than they lost at the outset.

Authors

Anthony A. Renshaw, PhD