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CONFIRMATION BIAS
Presented by:
SHEETAL
Roll no. 38
UNDERSTANDING THE BIAS
• We like a certain bands music based on our anticipation , repetition
and recognition. When a band change their style they fail to fulfill
our expectations.
• Our brain is designed to find patterns in everything that we hear,
everything that we take in and based on these information we
construct our opinion.
• Any information that threatens the architecture inside our heads
will be disregarded. Our brain does not like the identified pattern to
be broken, just like it wants to keep listening to a catchy song.
• Generally speaking we are constantly looking for reassurance of our
values, contradiction causes us discomfort which is even stronger
when emotions and values are involved. So we don’t challenge our own
beliefs even though we are exposed to evidence against them.
This is known as
Confirmation Bias!
◇ A confirmation bias is a type of cognitive bias that involves
favoring information that confirms your previously existing beliefs or
biases.
◇ Confirmation biases impact how we gather information, but they
also influence how we interpret and recall information.
o Most people choose A and 4 because these are the cards capable of
confirming the statement, but confirming evidence doesn’t prove
anything – the 4 card has no ability to invalidate the hypothesis. Flipping
the 7 card, however, could provide valuable disconfirming evidence – a
vowel on the other side means not all cards with vowels have an even
number on the other side.
◇ Much like in the card example
above, investors tend to gather
confirming evidence when making
investment decisions rather than
evaluate all available information.
◇ The impact of confirmation
bias is even stronger with an
existing belief since you are more
likely to quickly accept evidence
that supports that existing belief
and closely scrutinize evidence
that challenges it.
OBSERVATIONS BY PSYCHOLOGISTS
 In his book "Research in Psychology: Methods and Design," C. James Goodwin gives
a great example of confirmation bias as it applies to extrasensory perception:
"Persons believing in extrasensory perception (ESP) will keep close track of instances
when they were 'thinking about Mom, and then the phone rang and it was her!' Yet
they ignore the far more numerous times when (a) they were thinking about Mom and
she didn't call and (b) they weren't thinking about Mom and she did call. They also fail
to recognize that if they talk to Mom about every two weeks, their frequency of
'thinking about Mom' will increase near the end of the two-week-interval, thereby
increasing the frequency of a 'hit.'“
 As Catherine A. Sanderson points out in her book "Social Psychology," confirmation
bias also helps form and re-confirm stereotypes we have about people.
"We also ignore information that disputes our expectations. We are more likely to
remember (and repeat) stereotype-consistent information and to forget or ignore
stereotype-inconsistent information, which is one way stereotypes are maintained
even in the face of disconfirming evidence. If you learn that your new South Indian
friend hates football and loves sailing, and that your new North Indian friend hates
spicy foods and loves rap music, you are less likely to remember this new stereotype-
inconsistent information."
◇ Confirmation bias is not only found in our personal beliefs, it can
affect our professional endeavors as well. In the book "Psychology,"
Peter O. Gray offers this example of how confirmation bias may
affect a doctor's diagnosis:
"Groopman (2007) points out that the confirmation bias can couple
with the availability bias in producing misdiagnosis in a doctor's
office. A doctor who has jumped to a particular hypothesis as to
what disease a patient has may then ask questions and look for
evidence that tends to confirm that diagnosis while overlooking
evidence that would tend to disconfirm it. Groopman suggests that
medical training should include a course in inductive reasoning that
would make new doctors aware of such biases. Awareness, he thinks,
would lead to fewer diagnostic errors. A good diagnostician will test
his or her initial hypothesis by searching for evidence against that
hypothesis."
CONCLUSION
 Unfortunately, we all have confirmation bias. Even if you
believe you are very open-minded and only observe the facts
before coming to conclusions, it's very likely that some bias
will shape your opinion in the end. It's very difficult to
combat this natural tendency.
 That said, if we know about confirmation bias and accept
the fact that it does exist, we can make an effort to
recognize it by working to be curious about opposing views
and really listening to what others have to say and why. This
can help us better see issues and beliefs from another
perspective, though we still need to be very conscious of
wading past our confirmation bias.
Behavioural Finance

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Behavioural Finance

  • 2. UNDERSTANDING THE BIAS • We like a certain bands music based on our anticipation , repetition and recognition. When a band change their style they fail to fulfill our expectations. • Our brain is designed to find patterns in everything that we hear, everything that we take in and based on these information we construct our opinion. • Any information that threatens the architecture inside our heads will be disregarded. Our brain does not like the identified pattern to be broken, just like it wants to keep listening to a catchy song. • Generally speaking we are constantly looking for reassurance of our values, contradiction causes us discomfort which is even stronger when emotions and values are involved. So we don’t challenge our own beliefs even though we are exposed to evidence against them.
  • 3. This is known as Confirmation Bias! ◇ A confirmation bias is a type of cognitive bias that involves favoring information that confirms your previously existing beliefs or biases. ◇ Confirmation biases impact how we gather information, but they also influence how we interpret and recall information.
  • 4. o Most people choose A and 4 because these are the cards capable of confirming the statement, but confirming evidence doesn’t prove anything – the 4 card has no ability to invalidate the hypothesis. Flipping the 7 card, however, could provide valuable disconfirming evidence – a vowel on the other side means not all cards with vowels have an even number on the other side.
  • 5. ◇ Much like in the card example above, investors tend to gather confirming evidence when making investment decisions rather than evaluate all available information. ◇ The impact of confirmation bias is even stronger with an existing belief since you are more likely to quickly accept evidence that supports that existing belief and closely scrutinize evidence that challenges it.
  • 6. OBSERVATIONS BY PSYCHOLOGISTS  In his book "Research in Psychology: Methods and Design," C. James Goodwin gives a great example of confirmation bias as it applies to extrasensory perception: "Persons believing in extrasensory perception (ESP) will keep close track of instances when they were 'thinking about Mom, and then the phone rang and it was her!' Yet they ignore the far more numerous times when (a) they were thinking about Mom and she didn't call and (b) they weren't thinking about Mom and she did call. They also fail to recognize that if they talk to Mom about every two weeks, their frequency of 'thinking about Mom' will increase near the end of the two-week-interval, thereby increasing the frequency of a 'hit.'“  As Catherine A. Sanderson points out in her book "Social Psychology," confirmation bias also helps form and re-confirm stereotypes we have about people. "We also ignore information that disputes our expectations. We are more likely to remember (and repeat) stereotype-consistent information and to forget or ignore stereotype-inconsistent information, which is one way stereotypes are maintained even in the face of disconfirming evidence. If you learn that your new South Indian friend hates football and loves sailing, and that your new North Indian friend hates spicy foods and loves rap music, you are less likely to remember this new stereotype- inconsistent information."
  • 7. ◇ Confirmation bias is not only found in our personal beliefs, it can affect our professional endeavors as well. In the book "Psychology," Peter O. Gray offers this example of how confirmation bias may affect a doctor's diagnosis: "Groopman (2007) points out that the confirmation bias can couple with the availability bias in producing misdiagnosis in a doctor's office. A doctor who has jumped to a particular hypothesis as to what disease a patient has may then ask questions and look for evidence that tends to confirm that diagnosis while overlooking evidence that would tend to disconfirm it. Groopman suggests that medical training should include a course in inductive reasoning that would make new doctors aware of such biases. Awareness, he thinks, would lead to fewer diagnostic errors. A good diagnostician will test his or her initial hypothesis by searching for evidence against that hypothesis."
  • 8. CONCLUSION  Unfortunately, we all have confirmation bias. Even if you believe you are very open-minded and only observe the facts before coming to conclusions, it's very likely that some bias will shape your opinion in the end. It's very difficult to combat this natural tendency.  That said, if we know about confirmation bias and accept the fact that it does exist, we can make an effort to recognize it by working to be curious about opposing views and really listening to what others have to say and why. This can help us better see issues and beliefs from another perspective, though we still need to be very conscious of wading past our confirmation bias.