Survivorship bias

Survivorship bias
When returns from a class of classes of investment are measured, it is common to look at what investments in that class are available and how they have performed.

The Survivorship Bias
We often hear the term "Survivorship Bias". The article explains the term with examples from daily life. The examples are easy to understand and the language is quite lucid.

survivorship bias: When a fund is dropped from an index, past values of the index may be adjusted to remove that dropped fund's past data.

Survivorship bias
Usually pertaining to fund manager or individual investor performance. Suppose we examined the performance over the last ten years of a group of managers that exist today.

For example, survivorship bias can be one type of look-ahead bias in a decade long study that exclude bankrupt companies. Look-ahead bias corrections can neutralize results that extrapolate back tested historical portfolio results.

The short lifetimes of many hedge funds means that there are many new entrants and many departures each year, which raises the problem of survivorship bias.

survivorship bias Not including failed companies in performance studies because they no longer... survivorship insurance A type of insurance that is applied to more than one person at a time. It pays...

See also: Bias, Billion, Hedge fund, Sharpe ratio, Statistical arbitrage