Website algorithms that guess what information a user would like based on prior searches is creating a heightened risk of confirmation bias among investors, a fund manager says.
Anthony Rayner, manager of Miton’s multi-asset fund range, sees such confirmation bias as becoming increasingly important as technology dominates media and as politics becomes more divisive.
"One of the impacts of technological advances in media is the growth of the filter bubble, which can protect us from views which are too dissimilar to our own," he said.
"In addition to the filter set by the user, technology brings to the reader the news most suited to them. Much of this gives the user the illusion of being informed but, partly through the power of confirmation bias, it’s largely false confidence."
Rayner said that in Miton's investment process his team searches for information from multiple sources, including local sources, ensuring team members receive different research, and follow a disciplined strategy which can help to limit behavioural biases more generally.
Edward Park, a director on the investment committee at Brooks Macdonald, said it was a natural tendency for investors to seek confirmation for their views in the media, as well as in markets.
His firm uses an open forum to overcome confirmation bias.
"We have spent a considerable amount of time shaping our investment process to try to correct for confirmation bias," he said. "We feel it is vital to utilise peer analysis in an investment process to give due attention to risks that don’t necessarily fit with one’s personal world view.”
Peter Griffin, investment director at Gale and Phillipson, said his process too uses a number of behavioural economic filters to mitigate risk including confirmation bias from internet filters.
"If you go on Google, what you are shown will be a function of what you have looked at it in the past. So you will be likely to see more information that confirms your view than detracts from it," he said.
