With Stock Selloff Raging, Views Abound on Where It Will End
(Bloomberg) — One thing to realize about a stock selloff: You won’t know it’s over until long after it ends. But that doesn’t keep people from trying to pick a bottom. Valuation, sentiment and history each form a basis for study.
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Reversion to a mean is the expectation. Which mean to revert to is the problem. A straightforward model in which elevated valuations return to normal mean could imply either a garden-variety tumble, or a truly awful one, depending on…