Survivorship bias is the tendency to focus only on successful examples while ignoring those that failed. This logical error leads investors to overestimate mutual fund performance, hedge fund indexes, and stock portfolios by ignoring unsuccessful funds and companies—a...
Think about how easier it is to judge a situation when you’re not the one in it. Consider how quickly we notice mistakes in others, whether it’s a friend making a bad financial decision, a colleague mishandling a project, or a trader holding onto a losing stock for...
Choice-supportive bias is the tendency to justify past strategic decisions retroactively by exaggerating their benefits and downplaying their flaws. This might look like someone buying an overpriced car and later convincing themselves it was a “great deal” despite...
Outcome bias happens when traders judge the quality of a decision based solely on the result, not the process behind it. Imagine driving home drunk and arriving safely. Was it a good trade? Of course not. The outcome was positive, but the decision-making process was...
Zero-risk bias is the human tendency to prefer absolute certainty, even when it’s not the most rational choice. These cognitive biases stem from an adaptive tendency to minimize unnecessary risks, even at the expense of long-term rewards—a concept frequently explored...
