Belief Perseverance

Belief perseverance is a psychological concept that talks about individuals choosing to stick with their pre-existing beliefs. These beliefs do not tend to change with contrary, new evidence and talk about the consistency of a belief system and rejection of perception-altering ideas. 

This is a type of cognitive bias. In finance, it can stop individuals from making the best of their investment decisions. Investors reject the obvious market indicators and hold on to losing stocks and traditional investment methods, delaying retirement savings. They result in financial losses and erosion of wealth.

The belief perseverance states that an individual tends to stick to their initial beliefs even when substantial proof exists against their validity. They can impact an individual's choices in varied arenas of life. This can be damaging especially when concerned with financial decision making. 

Proceeding with existing information is a good choice; it helps make quick decisions. However, ignoring substantial proof to look the other way toward the truth is not recommended. This is especially true in cases of investors who choose to ignore negative market conditions and continue with their investment strategies. They believe that situations will improve despite a company's declining performance, economic downturn and weak financials. The attitude of not reevaluating and making repetitive mistakes will bring huge losses in finance, time and effort.  

The behavior-based perception can also take forms through holding or losing stocks despite continuous fall in value. It involves opting for traditional investment methods despite access to technology research materials and new choices. It also impacts a person's retirement choices, as they believe their existing planning is sufficient, and there is no need to research new, comprehensive, high-yield plans. There can be long-term impacts on one's financial health due to such tendencies. Belief perseverance psychology can erode wealth and prevent them from having a financially secure future. 

The causes of perseverance of belief are given as follows:

1. Availability Heuristics: It can be described as the tendency of people to determine the likeliness of events or behaviors based on past occurrences. For instance, if an investor tends to believe that a particular sector stock could bring only losses to them due to their experience of trading. It is subjective.
2. Illusory Correlation: Perseverance of belief can arise when they make connections between two variables irrespective of the existence of such connection. For instance, individuals could have had a bad experience with one particular company product. The unsatisfactory experience could have stemmed from one faulty piece delivery damage or other reasons.  The individual, without further research, can conclude that all products from the company are bad.  
3. Data Distortion: Behavioral perceptions are shaped because of the differences in how data is received. Data distortion is accepting input from existing experiences but ignoring those that do not match their existing beliefs and creating opportunities to support the existing beliefs. For instance, the individual believes that a company's product is not good and opines that all products of the company are not good. However, due to data distortion, they would not select the product even in a supermarket to give it a second chance. They would ignore any suggestions or proof of usage from others and continue not to prefer them. 

Given below are types of perseverance beliefs

1. Self-perception perseverance - Individuals with self-perception perseverance may maintain their existing beliefs about themselves. These may include beliefs about their ability, values, and traits despite being proven otherwise.  
2. Social perception perseverance - Social perception perseverance deals with the character of individuals where they maintain beliefs about others. They believe about others or a group despite the existence of contrary evidence.  
3. Perseverance of causal theories - Perseverance of causal theories deals with individuals who believe in cause-and-effect relationships. They tend to believe them as a means to understand how the world works despite the lack of evidence to validate them

Let us look at some examples to understand the concept better.

Example #1

Suppose Dan is a trader and investor. He has invested in stocks of XYZ company. He invested in the stocks because of their strong fundamentals. However, there was a management shift in the company, and their decisions triggered a panic in the stock market. People were skeptical about the success of the company. They began to sell their stocks, and the prices started going down. Despite the various reports from experts, Dan continued to believe in his research and started buying the stocks. Unfortunately, the prices plummeted further, leaving him with a loss. He dismissed that management could play a major role in the stock prices and future. He believed that it will be replaced since it is a big company if the management is not efficient. However, there are too many factors to look into, and he could have, at the very least, held on to existing stocks rather than buy new ones. He is a victim of belief perseverance psychology, and he chose not to believe despite evidence in the stock market due to management failures.

Example #2 - A Real-Life Example

The article by Kendra Cherry talks about Heuristics and how these mental shortcuts lead to quick decisions. They also lead to biased thinking. The article by Kendra cherry talks about the available heuristics, which is a cause listed for the reason of behavior-based perseverance. It, therefore, translates that belief perseverance can be used to make quick decisions, but biased thinking should be avoided to make great decisions. 

Below are a few steps that help in avoiding the perseverance of belief. 

• Critical Thinking - Critical thinking is investigating logic from one's beliefs and assumptions. Critical thinking, when practiced, regularly challenges pre-existing notions. This looks into the sources of information, data distortion and perceptual differences to identify the reasons for supporting a belief. In short, it helps analyze why an individual supports their belief.  
• Feedbacks - Acceptance of feedback from their surroundings can be a technique that can be employed to correct biases.  This is because their surroundings will mostly be constituting individuals from varied backgrounds. Accepting constructive criticism and varied viewpoints can help develop a habit of accepting differences and, therefore, a shift in perception. 
• Reflection - Reflecting by self can also help bring changes in perception. Revisiting one's beliefs, assessment of evidence and comparison of new experiences add to reflections. This gives a new angle to the existing notions. It provides them an opportunity to bring in fresh perspectives. 

Differences between the concepts are given as follows.

#1 - Concept

• Belief perseverance refers to the individual tendency to stick to one's beliefs irrespective of the existence of proof against its validity.  
• Cognitive bias refers to individual tendencies to remember, recollect, seek and interpret that information about one's beliefs.  
• Belief bias is the tendency of an individual to judge a particular belief or notion based on logical perceptions. If there is a possible conclusion for the existence of that particular idea, even if there is no explicit evidence to support the idea, it is taken as valid.  

#2 - Essence

• Belief-based perseverance is rejecting an idea that does not support one's beliefs.   
• Confirmation bias is actively seeking information that supports an individual's belief. 
• Belief bias happens when the belief is aligned with existing knowledge.  

#3 - Causes

• Behavior-based perception happens because of interacting with the surroundings and perceiving it in the desired manner.  
• Confirmation bias happens because of information selection, interpretation bias and memory bias. 
• Belief bias happens because of deep-rooted convictions, repetitive arguments and limited time.