"Survivorship bias tends to distort data in only one direction, by making the results seem better than they actually are. This is because fund closures are often a result of underperformance."
vanguard.co.uk/documents/adv/…
vanguard.co.uk/documents/adv/…
Of course, this chart seems to be what started it all
War is a battle of tiny advantages leading to small wins that add up to victory:
"The winners are usually the guys who get 5% fewer of their planes shot down, or use 5% less fuel, or get 5% more nutrition into their infantry at 95% of the cost."
medium.com/@penguinpress/…
"The winners are usually the guys who get 5% fewer of their planes shot down, or use 5% less fuel, or get 5% more nutrition into their infantry at 95% of the cost."
medium.com/@penguinpress/…
"The armor, said Abraham Wald, doesn’t go where the bullet holes are. It goes where the bullet holes aren’t: on the engines."
In finance, the Survivorship Bias manifest itself by inflating returns for mutual funds by anywhere from 40 to 150 bps.
Research demonstrated that when you remove the funds that closed/died primarily due to poor performance - what's left looks much better.
Research demonstrated that when you remove the funds that closed/died primarily due to poor performance - what's left looks much better.
Lots of folks have discussed this, but this seems to be one of the most commonly cited research piece:
"Survivorship Bias and Mutual Fund Performance" Edwin J. Elton, Martin J. Gruber and Christopher R. Blake jstor.org/stable/2962224
"Survivorship Bias and Mutual Fund Performance" Edwin J. Elton, Martin J. Gruber and Christopher R. Blake jstor.org/stable/2962224
Here is Vanguard's "The mutual fund graveyard: An analysis of dead funds"
institutional.vanguard.co.uk/documents/mutu…
institutional.vanguard.co.uk/documents/mutu…
CRSP Survivor-Bias-Free US Mutual Fund Guide for CRSP
For publicly traded open-end mutual funds between 1962 and 2008. (updated quarterly)
crsp.org/products/docum….
For publicly traded open-end mutual funds between 1962 and 2008. (updated quarterly)
crsp.org/products/docum….
Abraham Wald's Work on Aircraft Survivability Marc Mangel and Francisco J. Samaniego
medicine.mcgill.ca/epidemiology/h…
medicine.mcgill.ca/epidemiology/h…
Survivorship to be a fascinating subject because it operates below our level of awareness. It is a fundamental flaw in our model of the world, making various forms of success appear easier than they really are.
Makes me wonder what else our instincts tend to be wrong about...
Makes me wonder what else our instincts tend to be wrong about...
Survivorship Bias in Performance Studies
(Roger G. Ibbotson; Stephen J. Brown; William Goetzmann
Stephen A. Ross)
terpconnect.umd.edu/~wermers/ftpsi…
(Roger G. Ibbotson; Stephen J. Brown; William Goetzmann
Stephen A. Ross)
terpconnect.umd.edu/~wermers/ftpsi…
On Persistence in Mutual Fund Performance Mark M. Carhart personal.psu.edu/qxc2/fin597/5-…
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