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

Question

Quizplus · Accepted Answer

The reversal effect suggests that securities that performed poorly in the past period will perform well in the next period. Therefore, buying stocks that performed poorly last period would be the best choice.

If You Believed in the Reversal Effect, You Should ________