Survivorship Bias

Survivorship bias occurs when analyses focus only on surviving entities, excluding those that failed, which leads to overly optimistic conclusions. In investment, focusing solely on successful funds or companies while ignoring those that went bankrupt or underperformed can distort performance assessments. Recognizing survivorship bias helps investors avoid misinterpreting data and making overly optimistic predictions.

• Focuses only on surviving entities, ignoring failures.
• Leads to overly optimistic conclusions.
• Common in investment performance evaluations.
• Recognizing this bias ensures more accurate assessments.