Mean reversion is “a concept of normality,” where extreme events can cause an asset to diverge from its long-term averages. For Deutsche Bank Foreign Exchange Macro Strategist Sebastien Galy, the theory of mean reversion works, so long as the underlying economic principles that exert the law of gravity on currency prices don’t change. Looking at currency markets, however, Galy notes that sometimes currency valuations and prices just don’t revert to their mean. This can be particularly when prudent government policies are not maintained. [timeless] Currency valuations follow a formula Currencies have traditionally been valued based on a formula, of sorts,…
The fear of Asset Bubbles In FX Markets
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.