1.“Reversion to the mean” means:
Extreme results (very high or very low) usually move back toward the average over time.
🧠 Simple explanation
When something performs much better than normal or much worse than normal, it often doesn’t stay that way forever. With time, it tends to return to its usual/average level.
📊 Easy examples
1. In exams
You score 95% (much higher than your usual 70%)
Next exam, your score likely moves closer to 70%, not always 95%
2. In sports
A player has an unusually amazing season
Next season, performance often drops closer to their career average
💰 In investing (very important)
A stock that rises too fast often slows down or falls
A stock that falls too hard may recover toward its normal value
This is why:
Chasing “hot” stocks is risky
Buying after panic selling can be smart (with research)
⚠️ What reversion to the mean does NOT mean
It does not guarantee recovery
It does not mean prices must bounce back quickly
Bad companies can stay bad
🧩 Simple sentence version
What goes far above or below normal usually moves back toward normal with time.
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