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Confirmation Bias

Confirmation bias is the tendency to seek, interpret, and remember information that confirms pre-existing beliefs while ignoring contradictory evidence.

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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

Study This Term In

Series 65Series 66

Related Terms

Anchoring Bias

Anchoring bias is over-reliance on the first piece of information encountered (the "anchor") when making decisions, even when arbitrary or outdated.

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