Explain the term Survivorship Bias and how it impacts the evaluation of the investment returns of...

Explain the term Survivorship Bias and how it impacts the evaluation of the investment returns of a group of portfolios.

Expert Solution

Survivorship biased- Survivorship biased means to show the funds performance of existing fund in the market as sample shown to the investor who wants to invest in the market. They do not show the actual picture of the market, they have to manipulate the investor by showing only those funds which is existing in the market, they don't show or tell them about those funds which was closed or not doing well in the history.
This will show the overestimation picture of the Portfolios.
It will imapct the investment return of the group of portfolio because if they invest in those portfolio which are winners today because market are in there favour, tomorrow all there winners portfolios are converted into loosers ones.

When we have to choose a Portfolio manager to invest in the market we have to see his history whether he has shows his all portfolio when they acheived superior return or flops in the past, if they doing a Survivorship biased, they will impact the return in near future.

I hope this clear your doubt.

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jeff jeffy answered 6 months ago

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