What does conservatism bias typically lead individuals to do?

Conservatism bias leads individuals to stick to their initial beliefs or prior probabilities and resist adjusting those beliefs in light of new information. This cognitive bias reflects a natural tendency to underreact to new evidence, often resulting in a slow adjustment to changing circumstances. For example, an investor may continue to hold onto a preconceived notion about a stock's future performance even when presented with updated financial metrics that suggest a different outlook. This can prevent them from making timely decisions that align with current market realities.

In the context of behavioral finance, conservatism can lead to missed opportunities as individuals fail to recognize or act on new trends or data that challenge their initial perspectives. This bias underscores the importance of continuously updating one's beliefs based on the best available information to make rational investment decisions.