ABSTRACT
Confirmation Bias – looking only for evidence supporting our current beliefs – is one method we have of avoiding changing our beliefs, so one could regard the Belief Perseverance Bias as a consequence of the existence of Confirmation Bias. There are other methods though, so Confirmation Bias is just one route to belief perseverance. Similarly, an important parameter of which one should be aware is correlation. One seeks a diversified portfolio which ideally will not have much correlation between its elements. Prior to that, sales brokers would often hype exotic asset classes such as wine or fine art on the basis that they lacked correlation with the stock market. Several unhelpful market effects of the Representativeness Heuristic have been noted by one author who studied the effects by means of an investor questionnaire. Investors also prefer to invest in companies that have “a good reputation and a good image and thereby neglect or underweight fundamental data and market comparators”.
