Anchoring Bias
The tendency to rely too heavily on an initial reference number when making subsequent judgements.
How it is identified
Test: estimates shift systematically toward an arbitrary starting value that carries no information about the answer
Unit
qualitative
In depth
In investing the most common anchor is the purchase price, which is a fact about the investor and not about the security — the market has no knowledge of what anyone paid and no obligation to return there. Other anchors include the 52-week high, a round number, an analyst's target price, and the price at which a stock was first noticed. The bias is documented to operate even with anchors known to be random, which is why awareness alone provides little protection. The countermeasure is to ask what you would pay today knowing nothing of your history with the security.
Worked example
A stock bought at ₹500 and now at ₹300 is held because the investor is waiting to get back to ₹500. The ₹500 is a fact about their statement, and no analysis anywhere concludes that the business is worth it.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Anchoring Bias” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.