New Delhi, Oct. 8 -- In investing, mean-reversion refers to the idea that, over the long term, asset valuation ratios tend to move towards their historical averages or 'means'. This is a widely accepted principle among investors because it offers a valuable framework for identifying potential opportunities.

reverting valuation ratios such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, or bond-equity earnings yield ratio (BEER)-which compares a government bond's yield to a stock market's earnings yield-can help investors gauge whether an asset class is cheap or expensive compared to its historical average. If a ratio is significantly above its long-term average, it suggests that valuations may eventually decrease, while ...