Reversal
Short-Term Reversal
A short-horizon contrarian signal that buys recent losers and sells recent winners over the next rebalance window.
Reversal
Long-Run Reversal
A contrarian long-horizon signal that ranks deep prior losers against prior winners to test whether extreme past underperformance eventually reverses.
Reversal
36-Month Long-Run Reversal
Definition phase
Definition
Long-run reversal measures market-adjusted performance over a long formation window and tilts toward the most extreme prior losers while shorting the strongest prior winners. In the representative setup, the formation period spans three years and ends before the rebalance date to avoid simple short-horizon overlap.
The economic intuition is overreaction: investors may push prices too far away from longer-run fundamentals after dramatic long-horizon winners and losers emerge. The signal is deliberately contrarian and asks whether the most heavily punished names eventually rebound.
Inside the finance research stack, the representative implementation sorts the Russell 1000 cross-section on the long-horizon reversal measure and compares the deepest prior losers against the strongest prior winners in a market-neutral spread.
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