LRreversal · Long term reversal · De Bondt and Thaler (1985)

Long-run reversal

Long minus short decile portfolio, value-weighted, market-adjusted. Quarterly, 1929Q1 to 2024Q4.

Expected return · posterior mean, % per year, averaged over the window

Next quarter

2026Q4

−1.78%

95% interval −8.49% to 4.50%

Next year

2026Q4–2027Q3

−1.69%

95% interval −8.44% to 4.58%

Next five years

2026Q4–2031Q3

−1.37%

95% interval −8.21% to 4.93%

Forecast made 16 Sep 2026, conditioning on this portfolio's OAP returns, which end 2024Q4. The 7 quarters between then and 2026Q4 are unobserved and are integrated out under the model.

Cumulative market-adjusted return

−98% since 1929Q1 · log scale

Past performance, annualized

Window	Mean	Vol.	Sharpe	t
1929Q1–2024Q4	0.42%	23.13%	0.02	0.18
2020Q1–2024Q4	8.73%	34.69%	0.25	0.56
2024Q1–2024Q4	−12.31%	31.35%	−0.39	−0.39
1929Q1–2024Q4	3.49%	24.57%	0.14	1.39
2020Q1–2024Q4	−2.81%	25.81%	−0.11	−0.24
2024Q1–2024Q4	−22.98%	16.77%	−1.37	−1.37
1929Q1–2024Q4	−0.45%	28.63%	−0.02	−0.16
2020Q1–2024Q4	−6.12%	42.89%	−0.14	−0.32
2024Q1–2024Q4	−31.25%	26.02%	−1.20	−1.20
1929Q1–2024Q4	5.31%	31.70%	0.17	1.64
2020Q1–2024Q4	−10.15%	30.57%	−0.33	−0.74
2024Q1–2024Q4	−38.65%	19.93%	−1.94	−1.94

Forecast Sharpe ratio, annualized

Window	Mean	95% interval	P(neg)
2026Q4	0.02	−0.19 – 0.24	0.42
2026Q4–2027Q3	0.02	−0.18 – 0.23	0.42
2026Q4–2031Q3	0.02	−0.18 – 0.21	0.43
2026Q4	−0.11	−0.41 – 0.21	0.75
2026Q4–2027Q3	−0.09	−0.37 – 0.21	0.72
2026Q4–2031Q3	−0.03	−0.25 – 0.22	0.60
2026Q4	−0.06	−0.30 – 0.16	0.70
2026Q4–2027Q3	−0.06	−0.28 – 0.16	0.69
2026Q4–2031Q3	−0.04	−0.24 – 0.16	0.65
2026Q4	−0.23	−0.54 – 0.14	0.89
2026Q4–2027Q3	−0.19	−0.47 – 0.15	0.87
2026Q4–2031Q3	−0.09	−0.31 – 0.18	0.77