Regression toward the mean

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Regression toward the mean

The tendency that a random variable will ultimately have a value closer to its mean value.
References in periodicals archive ?
While the averages are distorted by the huge losses during the financial crisis, Fitch expects some reversion to the mean in some areas, especially among auto loans and credit cards, where loss rates are likely unsustainably low.
This month we make a Sistema over MTS call as the former's recent strong underperformance looks unjustified, creating the potential for a reversion to the mean. Since 18 Jan Sistema has tumbled more than 10%, while MTS has jumped 8.5%, likely in part due to Sistema's intention to continue developing its Indian subsidiary SSTL.
Perhaps the most obvious one is simple reversion to the mean. Back in 2011, the worst-performing sector was the materials, which dropped by 2.2 percent.
"I think in statistical terms, we're due for what we'd call a 'reversion to the mean.' The results [for 2012] probably won't be as spectacular." And he was right.
One can think of periodic systemic risk as an inherent tendency toward reversion to the mean: short- and medium-term returns can deviate considerably and for extended periods from the expected long-run returns associated with various investment strategies and capabilities.
"If there is a reversion to the mean those job losses will obviously fall particularly heavily on the financial sector.
"It is more a case of reversion to the mean as far as MSM is concerned," reckons Ahmad, who believes that there was no need for governments in the region to pump in funds that could only provide a short-term solution.