In regression for autocorrelation, what does a negative beta indicate?

A negative beta in the context of regression analysis for autocorrelation indicates mean-reversion behavior. This implies that when the value of a time series is above its average, it is likely to decrease in future periods, and conversely, when it is below its average, it is likely to increase. Essentially, the negative beta suggests that there is an inverse relationship between the current and past values, meaning that periods of above-average performance are followed by periods of below-average performance, reflecting a tendency to revert to the mean.

Understanding this concept is critical in financial analysis, as it provides insights into how assets may behave over time based on historical performance. Many financial time series exhibit mean-reverting characteristics, which can have profound implications for investment strategies and risk management. Consequently, when analyzing such patterns, recognizing the significance of a negative beta becomes essential for making informed decisions.