Here’s what I think happens when we look at a stock market chart. Our eyes draw the line from the starting point to the ending point. We notice that the chart goes up and down, but eventually it always comes back to that nice straight line in the middle of all the jagged ups and downs. Our common sense mistakenly calls this "mean reversion", and we think we are seeing something significant, when what we are really seeing is just an average of things, where some of the things are above the average, and some are below, and that is not of much use or significance.

‘Common sense’..

BL Premium

This article is reserved for our subscribers.

A subscription helps you enjoy the best of our business content every day along with benefits such as exclusive Financial Times articles, ProfileData financial data, and digital access to the Sunday Times and Sunday Times Daily.

Already subscribed? Simply sign in below.



Questions or problems? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now