FYI: While the academic literature demonstrates that individual investors tend to be performance chasers, there’s a strong body of evidence — dating back to a 1985 paper by Werner F.M. De Bondt and Richard Thaler, Does the Stock Market Overreact? — documenting the reversal of long-term stock returns. De Bondt and Thaler found that for U.S. stocks classified based on their returns over the past three to five years, “losers” outperform “winners” over the following three to five years. De Bondt and Thaler, as well as other researchers, attribute this long-term return reversal to investor overreaction. This, of course, is a challenge to the notion of market efficiency.
Regards,
Ted
http://mutualfunds.com/expert-analysis/long-term-reversals-industry-performance-structural-change/
