Asset-class-specific long-horizon trend–reversion pattern

Ascertain whether, at multi-year horizons (approximately 2–16 years), the observed pattern in aggregated monthly data—reversion of weak trends coupled with persistence of strong trends—occurs separately within each asset class, specifically equity indices, long-term interest rates, commodity prices, and currencies valued in gold units.

Background

The paper extends trend–reversion analysis to horizons from years to decades using monthly data spanning multiple centuries and asset classes. Aggregated results indicate that weak trends tend to revert while strong trends persist at multi-year horizons, suggesting potential differences across asset classes due to their distinct long-term behaviors (e.g., equity risk premia, interest-rate declines, currency hyperinflations, commodity volatility).

However, due to noise in the long-horizon monthly data, the authors could not verify whether this pattern holds within each asset class separately. Establishing this would test the universality of the long-horizon behavior and complement the demonstrated universality at shorter horizons.