Confirmation Bias
Confirmation bias is the tendency to seek, interpret, and remember information that confirms pre-existing beliefs while ignoring contradictory evidence.
Exam Tip
Confirmation = seeking info that CONFIRMS beliefs. Solution: actively seek contrary evidence. Related to selective perception.
What is Confirmation Bias?
Seeking evidence that supports existing beliefs while dismissing contrary information.
Examples in Investing
- Only reading bullish analysis on stocks you own
- Dismissing negative news about favorite companies
- Selective memory for successful predictions
How to Overcome
- Actively seek contrary opinions
- Devil's advocate analysis
- Systematic research process
- Investment policy statement
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