Survivorship Equity

Survivorship equity refers to a bias that occurs when only successful companies or investments are considered, while unsuccessful ones are overlooked or excluded. In finance, for example, if we look at the performance of mutual funds, excluding those that have closed down can give an overly positive impression of average returns. This happens because only the "survivors" remain in the dataset, skewing the overall results. Understanding this concept is critical for making informed investment decisions and recognizing that past performance might not accurately reflect true potential.