Survivorship Bias
Drawing conclusions from a sample that includes only the entities that survived, omitting those that failed.
Formula
Test: the dataset excludes delisted, merged or closed entities, so the surviving sample's average overstates the true population average
Unit
%
In depth
Survivorship bias inflates almost every historical performance figure an investor encounters: fund category averages exclude closed funds, index histories exclude removed companies, and success stories are told by those who succeeded. Its most damaging form is in strategy backtesting, where testing on today's index constituents excludes every company that failed out of the index in the period. It also distorts the perceived base rate for concentrated bets, since the multibaggers are visible and the far larger number of similar-looking failures is not. Correcting it requires a survivorship-free database, which most freely available data is not.
Worked example
Of 100 equity funds a decade ago, 65 survive and average 13.4%. Including the 35 that closed, typically the worst performers, the true category average might be closer to 12%, and only the 13.4% is ever quoted.
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 “Survivorship 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.