If you believed in the reversal effect, you should ________.
A)buy bonds this period if you held shares last period
B)buy shares this period that performed poorly last period
C)buy shares this period that performed well last period
D)do nothing if you held the share last period

Question

Quizplus · Accepted Answer

The reversal effect suggests that assets that performed poorly in one period will perform well in the next period, so buying shares that performed poorly last period (option B) would be the best choice. Options A, C, and D are not consistent with the reversal effect philosophy.

If You Believed in the Reversal Effect, You Should ________