On Confirmation Bias

[Scooterd]

Confirmation Bias

Confirmation bias describes seeking out and giving more weight to information that supports and confirms the belief(s) you already hold. If you are long on a certain stock, you will likely pay more attention to articles with a positive sentiment about that stock.Speaking more broadly, you will likely seek out and emphasize information that supports your particular investing strategy.

Simultaneously, one will likely ignore or give less weight to information that contradicts their hypothesis. This avoidance of contrarian information is specifically known as the Semmelweis reflex.

Investors may find and give credence to biased research that confirms their existing opinion, they may irrationally interpret unbiased research in a way that confirms their existing opinion. This may cause investors to get stuck in their own echo chamber of thoughts and strategy and irrationally disregard new ideas that don’t fit their narrow scope.

Individual Investors can best serve themselves by seeking out contrary viewpoints that attempt to challenge and disprove their own.


 - Scoot

“Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” — John Kenneth Galbraith

[rnsmth]

(12-13-2021, 02:24 PM)Scooterd Wrote: Confirmation Bias

Confirmation bias describes seeking out and giving more weight to information that supports and confirms the belief(s) you already hold. If you are long on a certain stock, you will likely pay more attention to articles with a positive sentiment about that stock.Speaking more broadly, you will likely seek out and emphasize information that supports your particular investing strategy.

Simultaneously, one will likely ignore or give less weight to information that contradicts their hypothesis. This avoidance of contrarian information is specifically known as the Semmelweis reflex.

Investors may find and give credence to biased research that confirms their existing opinion, they may irrationally interpret unbiased research in a way that confirms their existing opinion. This may cause investors to get stuck in their own echo chamber of thoughts and strategy and irrationally disregard new ideas that don’t fit their narrow scope.

Individual Investors can best serve themselves by seeking out contrary viewpoints that attempt to challenge and disprove their own.


 - Scoot

“Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” — John Kenneth Galbraith

One must use good critical thinking skills when considering this. There is a big difference between allowing your thoughts to be confirmed by conspiracy theorists who walk on the wacky side of life and, for example, an certified expert in a field.

[fenders53]

This issue is prevalent on social media. On YouTube I watch channels for entertainment. Literally 100s of like minded people cheerlead a SPAC with horrible fundamentals. They are shocked when they get steam rolled while averaging themselves into the abyss. Any seasoned investor saw it coming six months in advance


I generally avoid oil threads on SA. Not because there aren't knowledgeable posters, but it's an echo chamber and a dissenting view is treated harshly.

This is part of my attraction to this forum. We have some strong disagreements here and the place is small enough to know others skillsets and investment goals. I often have a good idea who will challenge and welcome it. It's a little tougher elsewhere due to the massive number of posters.