Finance Papers

Document Type

Journal Article

Date of this Version

2011

Publication Source

Quarterly Journal of Finance

Volume

1

Issue

3

Start Page

423

Last Page

464

DOI

10.1142/S2010139211000158

Abstract

This study explores inference about assets that have survived by avoiding poor performance. The greater is the commonality across assets in prior uncertainty about parameters, the more an asset's inferred expected return should depend on its having survived. If there is no commonality, then a surviving asset's average return can possess substantial sampling bias while nevertheless equaling the appropriate conditional expected return. Survival bias as typically computed generally makes too severe an adjustment to survivors, unless one assumes that expected returns on all assets, dead or alive, are equal to one common value that is completely unknown before observing returns data.

Copyright/Permission Statement

Electronic version of an article published as Quarterly Journal of Finance, Vol. 1, Iss. 3, 2011, pp. 423-464, DOI: 10.1142/S2010139211000158. © World Scientific Publishing Company, http://www.worldscientific.com/worldscinet/qjf.

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Date Posted: 27 November 2017

This document has been peer reviewed.