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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamentals of Research

A research analyst relies only on information that supports an existing buy view on a stock and ignores contradictory evidence. Which bias does this best describe?

This is confirmation bias. The analyst selectively gathers and gives weight to information that supports the existing buy view while disregarding evidence that contradicts it. Other biases involve anchoring to a reference figure, overweighting recent events, or believing outcomes were predictable after they occurred.

  1. AConfirmation biasCorrect
  2. BAnchoring bias
  3. CRecency bias
  4. DHindsight bias

Explanation

Confirmation bias is the tendency to seek and favour evidence that supports a prior belief while discounting contrary evidence. Anchoring relies on an initial number, recency overweights recent events, and hindsight views past outcomes as predictable.

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