Wake Up and Smell the Coffee

[Cassandra]

Beware of confirmation bias and motivated reasoning.

Once an investor has bought into a stock based on faith in it, they may fall victim to confirmation bias and value only information that confirms their original bias in favor of the stock while ignoring even factual information or evidence that refutes it. Confirmation bias can be very costly to investors.

http://skepdic.com/confirmbias.html

http://www.fool.com/investing/small-cap/2004/11/30/beware-confirmation-bias.aspx

http://misrc.umn.edu/wise/papers/p1-3.pdf

Other biases discussed in this article as well: http://rpseawright.wordpress.com/2012/07/16/investors-10-most-common-behavioral-biases/

There's an even higher level of confirmation bias called "motivated reasoning" (reasoning suffused with emotion).

Motivated reasoning is confirmation bias taken to the next level. Motivated reasoning leads people to confirm what they already believe, while ignoring contrary data. But it also drives people to develop elaborate rationalizations to justify holding beliefs that logic and evidence have shown to be wrong. Motivated reasoning responds defensively to contrary evidence, actively discrediting such evidence or its source without logical or evidentiary justification. Clearly, motivated reasoning is emotion driven. It seems to be assumed by social scientists that motivated reasoning is driven by a desire to avoid cognitive dissonance. Self-delusion, in other words, feels good, and that's what motivates people to vehemently defend obvious falsehoods.

http://www.skepdic.com/motivatedreasoning.html

http://blogs.discovermagazine.com/intersection/2011/04/18/the-science-of-why-we-deny-science-motivated-reasoning/#.UO9Od29fByQ