Attribute Bias
The tendency of stocks selected by a quantitative technique or model to have similar fundamental characteristics, such as high yields and low earnings valuations. Most investing models that provide investment choices as an output will have to establish parameters that, by definition, will exclude certain stocks and offer ones with similar traits in return. Investopedia Says:
An investing or research technique that produces choices with attribute bias is not necessarily a bad thing; the biggest danger is that the stocks may correlate closely in their returns, eliminating some of the value of a diversified portfolio. One thing in particular to watch out for is investing in several companies operating in the same industry, as industry peers will often have similar fundamental values. Related Terms:
Discount Rate
Diversification
Dividend
Dividend Discount Model - DDM
Gordon Growth Model
Home Bias
Look-Ahead Bias
Sample
Sample Selection Bias |