Short-term reversal persists globally—If properly measured

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.