Confirmation Bias
The tendency to seek and favour information that supports an existing view while discounting information that contradicts it.
How it is identified
Test: evidence supporting the held position is sought and accepted readily, while contrary evidence is scrutinised or dismissed
Unit
qualitative
In depth
Confirmation bias operates in three ways: selective search, selective interpretation, and selective recall — so it corrupts the evidence at every stage rather than only at the conclusion. It is intensified by online environments that supply views matching those already held, and by the social cost of changing a position stated publicly. In investing it turns research into advocacy, where the conclusion precedes the analysis. The most effective countermeasure is to write down in advance what evidence would prove the thesis wrong, because that specification is difficult to make after the position is held.
Worked example
An investor holding a stock reads eleven bullish notes and one bearish, and dismisses the bearish one as poorly informed. The same investor before buying would have read the bearish note first, precisely because it was the odd one out.
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 “Confirmation 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.