If you believe in the reversal effect, you should
A)buy bonds in this period if you held stocks in the last period.
B)buy stocks in this period if you held bonds in the last period.
C)buy stocks this period that performed poorly last period.
D)go short.

Question

Quizplus · Accepted Answer

The reversal effect suggests that assets that performed poorly in the past tend to perform well in the future. Therefore, buying stocks that performed poorly in the last period would be the best choice.

If You Believe in the Reversal Effect, You Should