Survivorship bias occurs because over a certain period there are those companies or funds that go out of business, making those who survived a better performer. Therefore, the survivorship bias will overestimate the batch of funds or companies in comparison. Those who went under are not being included, which would otherwise invariably weaken the group and give a better estimate to the comparison given it is natural for companies to go out of business. Survivorship bias is a phenomena that exists in business and finance.

blog comments powered by Disqus