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Finance Dictionary and Glossary of Investment Terms
The tendency for failed companies to be excluded from performance studies due to the fact that they no longer exist. Survivorship bias causes the results of some studies to skew higher because only companies which were successful enough to survive until the end of the period are included. Similarly, mutual fund performance may be misleading due to survivorship bias if the fund family tends to merge or discontinue underperforming funds.
Specifically in the context of mutual funds, the tendency for poor performers to drop out while strong performers continue to exist. This results in an overestimation of past returns.