I Love Survivor Bias

There are a few things that always catch novice market commentators out – little things such as volatility, narrative fallacies and one of my all-time favourites – survivor bias. The chart below is lifted from an article titled – These are the 20 best-performing stocks of the past decade, and some of them will surprise you

As you can see there were some fairly outstanding long term moves by this group. However, I decided to redo the table and look at the maximum drawdown fro each stock during this period and it generated the table below.

Consistent with outperformance on the upside is outperformance on the downside – that’s simply the way it works. The implication from these prices is that it is simply a matter of finding one of these stocks and hanging on and you will be rich beyond measure. I wonder how many people have the stomach to handle and 82% drawdown.