An investor may ignore negative news in their potential investment assessment. Instead, the investor only gathers information that validates their views on the stock under review. This is known as:

A. Conservatism Bias
B. Confirmation Bias
C. Representativeness Bias

Correct Answer: B

Confirmation bias refers to the tendency to value or notice what reinforces one's previous beliefs and disregard any information that negates them. Such an investor ends up with an inappropriately large position and an under-diversified portfolio. For instance, FMPs may invest a relatively large amount of their investment assets in the company's shares they work for.