Survivorship Bias .

• Survivorship Bias

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Risks to civilization, humans, and planet Earth

1 Despite the importance of existential risks, it is a difficult subject to study directly since humanity has never been destroyed before; while this

does not mean that it will not be in the future, it does make modelling

existential risks difficult, due in part to survivorship bias.


Equity premium puzzle - Denial of equity premium

1 *Survivorship bias of exchanges: exchanges often go bust (just as

governments default; for example, Shanghai stock exchange during

1949 communist takeover), and this risk needs to be included – using only exchanges which have survived for the long-term overstates returns. Exchanges close often enough for

this effect to matter.https://store.theartofservice.com/the-survivorship-bias-toolkit.html

Risks to civilization, humans and planet Earth

1 Human extinction is a difficult subject to study directly since humanity has never been destroyed before; while

this does not mean that it will not be in the future, it does make modelling existential risks difficult, due in part

to survivorship bias.


Hedge funds - Non-investable indices

1 The short lifetimes of many hedge funds means that there are many new entrants and many departures each year, which

raises the problem of Attrition bias|survivorship bias. If we examine only funds that have survived to the present, we will

overestimate past returns because many of the worst-performing funds have not

survived, and the observed association between fund youth and fund performance suggests that this bias may be substantial.


Private equity - Private equity fund performance

1 This analysis may actually overstate the returns because it relies on

voluntarily reported data and hence suffers from survivorship bias (i.e


Online participation - Participation in the social web

1 Often, feedbacks, opinions and editorials are posted from those users who have stronger feelings

towards the matter than most others; thus it is often the case that some

posts online are not in fact representative of the entire

population leading to what is call the Survivorship bias


Rags to riches - Criticism

1 The concept of Rags to riches has been criticised by social reform movement|

reformers, revolutionaries, essayists and statisticians, who argue that only a

handful of exceptionally capable and/or mainly Luck|lucky persons are actually able to travel the rags to riches road,

being the great publicity given to such cases a natural Survivorship bias

illusion,Taleb, 2001


Jensen's alpha - History

1 Since Eugene Fama, many academics believe financial markets are too Efficient-

market hypothesis|efficient to allow for repeatedly earning positive Alpha, unless

by chance. To the contrary, empirical studies of mutual funds spearheaded by Russ Wermers usually confirm managers'

stock-picking talent, finding positive Alpha, however this work has been criticized.

Among the criticisms is survivorship bias.


Fooled by Randomness - Thesis

1 * Survivorship bias. We see the winners and try to learn from them, while forgetting the huge number of

losers.


Survivorship bias

1 'Survivorship bias', or 'survival bias', is the logical error of concentrating on the

people or things that survived some process and inadvertently overlooking those that did not because of their lack of visibility. This can lead to false conclusions in several different

ways. The survivors may be actual people, as in a medical study, or could be companies or research subjects or applicants for a job, or

anything that must make it past some selection process to be considered further.


Survivorship bias

1 Survivorship bias can lead to overly optimistic beliefs because failures

are ignored, such as when companies that no longer exist are excluded

from analyses of financial performance


Survivorship bias

1 Survivorship bias is a type of selection bias.


Survivorship bias - In finance

1 In finance, survivorship bias is the tendency for failed companies to be excluded from performance studies

because they no longer exist



1 In this paper the researchers eliminate survivorship bias by

following the returns on all funds extant at the end of 1976



1 To use the current 500 members only and create a historical equity

line of the total return of the companies that met the criteria,

would be adding survivorship bias to the results



1 Financial writer Nassim Taleb called the survivorship bias silent evidence

in his book The Black Swan.


Survivorship bias - In the military

1 During World War II, the statistician Abraham Wald took survivorship bias

into his calculations when considering how to minimize bomber

losses to enemy fire


Survivorship bias - In cats

1 Another possible explanation for this phenomenon would be survivorship bias. The fact that cats who die in

falls are less likely to be brought to a veterinarian than injured cats, and thus many of the cats killed in falls

from higher buildings are not reported in studies of the subject.


Survivorship bias - As a general experimental flaw

1 Survivorship bias (or survivor bias) is a statistical artifact (error)|artifact in applications outside finance, where studies on the remaining population are fallaciously compared with the

historic average despite the survivors having unusual properties.

Mostly, the unusual property in question is a track record of success

(like the successful funds).https://store.theartofservice.com/the-survivorship-bias-toolkit.html


1 A major criticism which surfaced against his calculations was the possibility of unconscious survivorship bias in subject selections. He was

accused of failing to take into account the large effective size of his sample (all the people he

rejected as not being strong telepaths because they failed at an earlier testing stage). Had he done this he might have seen that, from the large sample, one or two individuals would

probably achieve the track record of success he had found purely by chance.



1 Survivorship bias is one of the issues discussed in the provocative 2005

paper Why Most Published Research Findings Are False.


Survivorship bias - In business law

1 Survivorship bias can raise Truth in advertising|truth-in-advertising problems when the success rate advertised for a

product or service is measured with respect to a population whose makeup differs from that of the target audience

whom the company offering that product or service targets with advertising claiming that success rate. These problems become

especially significant when


Global catastrophic risks

1 Researchers experience difficulty in studying human extinction directly,

since humanity has never been destroyed before. While this does not mean that it will not be in the future,

it does make modelling existential risks difficult, due in part to

survivorship bias.


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Survivorship Bias .

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