A forward-looking bias occurs when the analysis or decision-making process is influenced by information or expectations about future events. It can lead to overemphasis on future projections and neglect of historical data or current conditions.

B is incorrect. Survivorship bias refers to the error that arises when only successful or surviving entities are considered in a study or analysis, while ignoring those that failed or did not survive. It can lead to an overestimation of performance or outcomes since the unsuccessful entities are excluded from the analysis.

C is incorrect. Illiquidity bias refers to the distortion or bias that arises when analyzing or valuing illiquid assets or securities. Illiquid assets are more difficult to sell or trade, and their pricing may be less transparent or subject to higher transaction costs. This bias can lead to inaccuracies or underestimation of the true value or risk associated with illiquid assets.

D is incorrect. Sample selection bias occurs when the sample or data used for analysis is not representative of the entire population or is biased towards certain characteristics or outcomes. It can lead to erroneous conclusions or generalizations.

Things to Remember

• Confirmation bias: This bias occurs when individuals seek out information that confirms their preexisting beliefs or expectations, while ignoring or discounting contradictory information.
• Overconfidence bias: This bias refers to the tendency for individuals to overestimate their own abilities, knowledge, or the accuracy of their predictions.
• Anchoring bias: Anchoring bias occurs when individuals rely too heavily on initial information or the first piece of information they receive when making decisions or judgments.