The Reversal factor shows that stocks overreact in the short term. The stocks that have done the best in the past month tend to do poorly next month, and the stocks that have fallen most over the past month provide an average excess return in the month ahead.
The effect is based on a very active strategy with almost 100% turnover every month. The profit per trade is therefore also small, and some studies also point out that the whole effect can even disappear quickly if we do not act sensibly.
However, recent studies show that it is possible to trade based on a reversal strategy with a few relatively simple adjustments. Reversal has also been documented on a weekly basis, but then we see that the stock after a slight reversal actually continues in the same direction as the weekly return, ie we have a momentum effect for the rest of the year after a positive week.