Question

Give a "financial" example where not taking selection bias account can lead to a wrong conclusion. Explain observes the outcome and the source of selection bias.

Answer 1

Selection bias is a kind of bias which occurs when we are select our sample or the data incorrectly. Usually this means accidentally or unknowingly working with a specific subset of audience instead of the whole, rendering the sample unrepresentative of the whole population. The most typical reason is collecting and working only with data that is easy to access.

Example :

Lets assume we go over the social media(say Facebook) and take a random survey regarding the people's view on the current President of the country.

Outcome : So most of the responces would be the people who are active of social media and we know that most of the social media users are from the age group 15 - 30, so the responces and thus the further conclusions would be restricted to this age group and It wouldn't cover the senior citizens which are very likely to different opinions on the same.