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02 May 2019 Survivorship Bias

"History is written by the victors" - Winston Churchill

When considering the utility of financial indices, inevitably, the issue of survivorship bias will be raised. The argument goes that managers/funds/companies in any given index at its commencement are then subject to the forces of natural selection. The stronger performers remain whilst weaker players exit the index for one reason or another: by construction (ie FTSE 100) or by ceasing to exist (ie fund closures) or by choosing to no longer participate (ie voluntary peer groups). The result of this natural selection process is that the performance of survivors in any given index is biased upwards and, as the performance lookback period increases, all those remaining in the index end up being above average.

Mathematically, survivorship bias occurs as, whilst the historical index values remain constant, the constituents do not. Outperformers join; underperformers leave. In this article, we consider: what survivorship bias is; what effect it has on the ARC Private Client Indices (‘PCI’); possible causes; and what it means for investors seeking to use PCI as a performance benchmark.

Read on…

Download a PDF of the article here

For further information:

Graham Harrison, Managing Director, +44 (0) 1481 817777,

A full list of Data Contributors to ARC PCI is available at

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