CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

An examination of the historical performance of stocks currently trading on major stock exchanges will likely suffer from ______.
A. survivorship bias
B. time-period bias
C. sample selection bias
Explanation: Survivorship bias is a type of sample selection bias in which entities that dropped out of the study during the study period are excluded. Consequently, an analysis of historical performances of stocks must take into account those in existence at the beginning of the period. If they drop out during the study period, then a total loss on those shares should be factored into the historical performance of the group of stocks. By selecting only those currently trading (i.e., the survivors), we ignore the poor performance of those that dropped out.

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