Notes

To invest successfully over a lifetime does not require a stratos￾pheric IQ, unusual business insight, or inside information.
What’s needed is a sound intellectual framework for decisions
and the ability to keep emotions from corroding that frame￾work.
—Warren Buffett
BIAS DESCRIPTION
Bias Name: Conservatism
Bias Type: Cognitive
General Description. Conservatism bias is a mental process in which
people cling to their prior views or forecasts at the expense of acknowl￾edging new information. For example, suppose that an investor receives
some bad news regarding a company’s earnings and that this news nega￾tively contradicts another earnings estimate issued the previous month.
Conservatism bias may cause the investor to underreact to the new infor￾mation, maintaining impressions derived from the previous estimate
rather than acting on the updated information. It is important to note that
the conservatism bias may appear to conflict with representativeness bias,
described in Chapter 5; in representativeness, people overreact to new in￾formation. People can actually exhibit both biases: If new data appears to
fit, or appears representative of, an underlying model, then people may