Reversion to the mean

Reader comment on: Thoughts on Romney's Victory

Submitted by Lyle (United States), Jan 10, 2012 23:04

In More Money Than God (on Hedge Funds) it points out that if you have a successful strategy everyone piles on that strategy and your returns revert to the mean of the market or worse. Now this speaks specifically of hedge funds, but I suspect it's also true of private equity. So as everyone decided to move to private equity too much money came in forcing the returns downward. Or as Buffet has said you have innovators, imitators and idiots. Later stage private equity likely is in the third class.

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Other reader comments on this item

Title By Date
What messenger would you choose? [58 words]FreeMarketFanJan 11, 2012 08:09
⇒ Reversion to the mean [90 words]LyleJan 10, 2012 23:04
↔ Great victory speech [15 words]Dan CalabriaJan 11, 2012 19:55

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