Reverse Survivorship Bias

AAA

DEFINITION of 'Reverse Survivorship Bias'

The tendency for low performers to remain in the game, while high performers are inadvertantly dropped from the running. This bias can be applied to a variety of vehicles ranging from the housing market, stock indexes and even investorss capabilities. The phenomenon occurs when calculating performance based solely on past performances, without taking into account extenuating circumstances such as the economic standpoint at which decisions were made.

INVESTOPEDIA EXPLAINS 'Reverse Survivorship Bias'

An example of reverse survivorship can be observed in the Russell 2000 index that is a subset of the 2000 smallest securities from the Russell 3000. The loser stocks stay small and stay in the small cap index while the winners leave the index once they become too big and successful.

RELATED TERMS
  1. NAHB/Wells Fargo Housing Market ...

    An index based on a monthly survey of members belonging to the ...
  2. Survivorship Bias Risk

    The possibility that an investor will make a misguided investment ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding ...
  4. Survivorship Bias

    The tendency for mutual funds with poor performance to be dropped ...
  5. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
  6. Capitalization-Weighted Index

    A type of market index whose individual components are weighted ...
Related Articles
  1. Active Trading Fundamentals

    An Introduction To Behavioral Finance

  2. Mutual Funds & ETFs

    Published Mutual Fund Returns Not Always ...

  3. Economics

    The ABCs Of Stock Indexes

  4. Active Trading

    The Linear Regression Of Time and Price

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center