Question

2. The failure to include liquidated or merged funds in performance reports of mutual funds is...

2. The failure to include liquidated or merged funds in performance reports of mutual funds is called ________________.

  

a. The worst behavioral bias in finance

  

b. Survivorship bias

  

c. The passive fund bias

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Answer #1

The failure to include liquidated or merged funds in performance reports of mutual funds is called Option B - Survivorship Bias. Survivorship Bias is the capacity to view the activities and performances of the existing funds or stocks in the market as a representative sample of all the other funds or the stocks without any regards to the funds that have been liquidated or merged. It often results due to a lack of visibility among the other funds. As such, this is the correct answer.

Option A is incorrect. The worst behavioral bias in finance is not the right answer to the given situation.

Option C is incorrect. Passive fund bias does not analyse the failure to include liquidated or merged funds in performance reports of mutual funds. This option is incorrect.

Please let me know if you have any questions via comments and all the best :)

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