A recurring theme has been looking at bubbles in financial markets, or to be more precise, significant moves in price that are greater or less than normal. The simple view is that if there is a significant move over a given period, it will not continue. Hence, fade the large move under the view that prices will mean-revert.
However, when is a move too big? Look at the NVDA for the stock market. An extreme was hit well before the beginning of 2024. Look at cocoa futures prices over the last 3-6 months. There would have been good reason to sell or sell short these two high profile markets.
The paper "Bubbles for Fama" shows that even if we place a high return number as a threshold there are still strong reasons for prices to go higher. It is not a given that there will be mean reversion. The probability of a revision is high and there are factors that will increase the likelihood of a decline but calling a bubble top is not easy and should be done with caution.
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