Is this not timing the market? How do you calculate what is "high" and "low" - rolling average increasing 7% per year, compare current price to that expectation?
> Mean reversion in finance suggests that asset prices and historical returns eventually revert to their long-term mean or average levels
The avg. 7% per year will break down into very good years and bad years. Let's say the S&P500 is already down -5% YTD and has underperformed over recent years, then you would it considered to be low, because you would rather expect the performance to increase in order to match the long-term avg. of 7%. So at this point you would happily buy in and expect mean reversion. But of course there's no such thing as perfect timing (except in hindsight) and no guarantee for mean reversion to happen.
Timing the market is doable I'd say. Not all the time and not by everyone but it is completely doable. Sometimes you will buy too late or sell too early but even buying the dips is timing the market. If you partook in some stocks, more so than otherwise, during the March lows you were also timing the market.
> Mean reversion in finance suggests that asset prices and historical returns eventually revert to their long-term mean or average levels
The avg. 7% per year will break down into very good years and bad years. Let's say the S&P500 is already down -5% YTD and has underperformed over recent years, then you would it considered to be low, because you would rather expect the performance to increase in order to match the long-term avg. of 7%. So at this point you would happily buy in and expect mean reversion. But of course there's no such thing as perfect timing (except in hindsight) and no guarantee for mean reversion to happen.