Imagine you watch a stock shoot up 20% in a single month. Your instinct might be to buy, hoping the trend keeps going. But history suggests the opposite: that stock is likely to give back some of those gains next month. This is the short‑term reversal effect — one of the strongest, yet often misunderstood, patterns across different stocks. In this chapter, we look at why last month’s winners often stumble and last month’s losers often bounce back, and we build a factor that captures this behavior.