Attribute Bias

AAA

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 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 TERMS
  1. Discount Rate

    The interest rate charged to commercial banks and other depository ...
  2. Instant History Bias

    An inaccuracy in the appearance of investment fund returns that ...
  3. Sample Selection Bias

    A type of bias caused by choosing non-random data for statistical ...
  4. Sample

    A subset containing the characteristics of a larger population. ...
  5. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted ...
  6. Diversification

    A risk management technique that mixes a wide variety of investments ...
Related Articles
  1. Discounted Cash Flow Analysis
    Fundamental Analysis

    Discounted Cash Flow Analysis

  2. Digging Into The Dividend Discount Model
    Markets

    Digging Into The Dividend Discount Model

  3. Major Blunders In Portfolio Construction
    Mutual Funds & ETFs

    Major Blunders In Portfolio Construction

  4. How Low-Volatility ETFs Can Enhance ...
    Investing News

    How Low-Volatility ETFs Can Enhance ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center