What is Survivorship bias?
Survivorship bias is the distortion that appears when a study only includes the funds, stocks or traders that are still around, leaving out the ones that closed, merged, went bankrupt or quit. Because the ones that disappear tend to be the ones that did badly, the survivors make the average look better than it really was.
Why Survivorship bias matters
A backtest run on today's list of companies already knows which ones made it, so its results can be far better than reality.
Related terms
Lessons that use this term
- Survivorship bias: why testing only the winners lies
- Look-ahead bias: when a backtest sees the future
- Why a strategy screenshot proves almost nothing