A Simple Strategy for Getting Rid Of Confirmation Bias

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A Simple Strategy for Shaking Confirmation Bias – a short nugget from Barry Ritholtz followed by one of the papers cited

One of the most insidious cognitive biases affecting investors and traders is confirmation bias.  Once we hold a particular view, we tend to prefer processing information that fits with that view.  What’s worse is that, because of our bias blind spots, we commonly recognize biased thinking in others, but not in ourselves.  We know from research in psychology that fresh inputs and mental flexibility are essential to creativity of thought.  When we become locked in confirmation bias, we cease to innovate.

So how is one to overcome not only confirmation bias, but our own bias blind spots?  One way is to develop the discipline of reading articles and posts that have been selected for their quality by experienced, independent agents.  This is why I make it a habit to read selections curated by Abnormal Returns and The Big Picture.  At various times, the editors of those blogs, Tadas Viskanta and Barry Ritholtz, have highlighted posts from my TraderFeed blog.  It’s been my observation that, with rare exception, they have selected posts that I myself found to be among my more informative offerings.

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Corsair CapitalCorsair Capital was down by about 3.5% net for the third quarter, bringing its year-to-date return to 13.3% net. Corsair Select lost 9.1% net, bringing its year-to-date performance to 15.3% net. The HFRI – EHI was down 0.5% for the third quarter but is up 11.5% year to date, while the S&P 500 returned 0.6% Read More

 

Full article via Barry Ritholtz, more below

See Confirmation Bias: The Bias Blind in PDF format here.

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