There is a theory that stocks that have fallen greatly in a year tend to bounce back in the first three months of the following year.
Is this true?
To analyse this, the ten worst performing stocks in the FTSE 350 in a year were put into an equally-weighted portfolio, the performance of which is measured for January-March of the following year.
The chart below shows the results for the years from 2003 to 2014: the charts plot the Bounceback Portfolio and FTSE 350 returns for the period January-March each year.
We can observe: