What is confirmation bias characterized by?

Confirmation bias is characterized by the tendency to favor information that confirms existing beliefs or preconceptions, often leading individuals to see what they want to see. This cognitive bias causes investors to selectively gather or interpret evidence, often disregarding information that contradicts their viewpoint.

In the context of investment decisions, confirmation bias can result in individuals focusing on data that supports their investment strategy while ignoring indicators that suggest it may not be the best course of action. For example, an investor who believes a particular stock will perform well may give more weight to positive news about that stock while dismissing negative reports or contrary analysis.

The other options do not accurately capture the essence of confirmation bias. A comprehensive evaluation of all investment options reflects a rational and balanced approach, which is contrary to the selective nature of confirmation bias. Blindly accepting all information is more indicative of a lack of discernment rather than a bias towards confirming beliefs. Avoiding emotional responses to investments aligns with a disciplined investment philosophy, which stands in opposition to the influence of cognitive biases like confirmation bias, where emotions often play a significant role in decision-making.