12-13-2021, 02:24 PM
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
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