Search Investopedia

Attribute Bias

Filed Under »
Dictionary Says

Definition of 'Attribute Bias'

The tendency of stocks selected by a quantitative technique or model to have similar fundamental characteristics, such as high yields and low earnings valuations. Most investing models that provide investment choices as an output will have to establish parameters that, by definition, will exclude certain stocks and offer ones with similar traits in return.
Investopedia Says

Investopedia explains 'Attribute Bias'

An investing or research technique that produces choices with attribute bias is not necessarily a bad thing; the biggest danger is that the stocks may correlate closely in their returns, eliminating some of the value of a diversified portfolio. One thing in particular to watch out for is investing in several companies operating in the same industry, as industry peers will often have similar fundamental values.

Related Definitions

  •

    Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained from the DDM is higher than ...
    Read More »

  • Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and ...
    Read More »

  • Dividend

    1. A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount ...
    Read More »

    • Discount Rate

      1. The interest rate that an eligible depository institution is charged to borrow short-term funds directly from a Federal Reserve Bank. Different types of loans are available from ...
      Read More »

    • Look-Ahead Bias

      Bias created by the use of information or data in a study or simulation that would not have been known or available during the period being analyzed. This will usually lead to inaccurate ...
      Read More »

    • Home Bias

      The tendency for investors to invest in a large amount of domestic equities, despite the purported benefits of diversifying into foreign equities. This bias is believed to have arisen as ...
      Read More »

    • Diversification

      A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments ...
      Read More »

    • Sample

      A subset containing the characteristics of a larger population. Samples are used in statistical testing when population sizes are too large for the test to include all possible members ...
      Read More »

    • Sample Selection Bias

      A type of bias caused by choosing non-random data for statistical analysis. The bias exists due to a flaw in the sample selection process, where a subset of the data is systematically ...
      Read More »

    • Instant History Bias

      An inaccuracy in the appearance of investment fund returns that occurs when only new, successful funds report their numbers while new, unsuccessful funds close and their poor returns ...
      Read More »

Articles Of Interest

Sponsored links
Hot Definitions
Partner Links
Suggested Definitions