I read the Wikipedia articles, and it implied that it was different: https://en.wikipedia.org/wiki/Regression_toward_the_mean

In finance, the term mean reversion has a different meaning. Jeremy Siegel uses it to describe a financial time series in which "returns can be very unstable in the short run but very stable in the long run." More quantitatively, it is one in which the standard deviation of average annual returns declines faster than the inverse of the holding period, implying that the process is not a random walk, but that periods of lower returns are systematically followed by compensating periods of higher returns, in seasonal businesses for example.

I was of the impression it was practically the same thing. Just that one might be more general than the other.

I'm asking in the context of both financial instrument price/ror, e.g., stock prices, and cash flow analysis when doing DCF.

Does it make sense to say that we are using an assumption of "mean reversion" of past cash flows when we estimate future cash flows as the mean of past cash flows? (The investment object in question has stabil/sideways cash flow.)


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