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Short-term reversal persists globally—If properly measured

Author

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  • Stosik, Jan
  • Zaremba, Adam

Abstract

Short-term reversal appears to have weakened in international equity markets because standard measures mix firm-specific and industry-wide returns. When evaluated relative to industry peers, the reversal persists. Using data from 64 countries, the conventional strategy delivers negligible returns, whereas an industry-adjusted strategy earns 0.53% per month with a Sharpe ratio of 0.74. The effect reflects the reversal of firm-specific shocks masked by persistent industry components. A regret-based signal captures the same industry-relative variation, adding no incremental return. Reversal did not disappear; it was mismeasured.

Suggested Citation

  • Stosik, Jan & Zaremba, Adam, 2026. "Short-term reversal persists globally—If properly measured," Economics Letters, Elsevier, vol. 267(C).
    • Handle: RePEc:eee:ecolet:v:267:y:2026:i:c:s0165176526003095
    DOI: 10.1016/j.econlet.2026.113113
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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