Comprehensive and Detailed Explanation From Exact Extract:
Survivorship bias occurs when underperforming funds are terminated and excluded from performance rankings, making surviving funds appear to perform better over time. The feedback from the document states:
"All comparison universes exhibit some degree of survivorship bias no matter how carefully the universes are constructed. Survivorship bias develops as defunct portfolios drop out and are excluded from rankings in subsequent quarters. Funds that are terminated or cease to exist are usually those who have been unsuccessful, creating an upward bias in the returns of longer-run funds in the surviving universe."
[Reference:Chapter 14 – Understanding Mutual Fund PerformanceLearning Domain:Evaluating and Selecting Mutual Funds, ]
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