This checklist is a practical job aid designed to be used before finalizing a financial analysis, credit memorandum, or investment recommendation. Its purpose is to force a conscious review of potential behavioral biases that may have influenced the analysis.
It is a companion to the Debiasing Techniques for Analysts guide, which provides more detail on the concepts below.
Before finalizing your recommendation, go through these questions honestly. This is not about finding the "right" answer but about promoting self-awareness and more robust thinking.
[ ] Confirmation Bias: Have I actively sought out and given fair consideration to information that contradicts my thesis? What are the top 3 strongest arguments against my recommendation?[ ] Conservatism Bias: Is my analysis overly anchored to my prior view? If I were looking at this company for the first time today with the latest information, would my conclusion be the same?[ ] Anchoring Bias: Is my valuation or conclusion heavily influenced by an initial number (e.g., the 52-week high, a previous target price, the deal's announcement price)? What would my valuation be if I ignored that anchor?[ ] Hindsight Bias: Am I overestimating my ability to have predicted past events? Am I giving management too much or too little credit based on outcomes that may have been due to luck?[ ] Availability Heuristic: Is my thesis based on a vivid, recent news story or a memorable anecdote? Have I grounded my analysis in a systematic review of long-term data rather than what is easiest to recall?[ ] Framing Bias: Have I framed the decision in multiple ways? (e.g., "reasons to sell" vs. "reasons to buy"; "potential loss" vs. "potential gain").[ ] Representativeness Bias: Am I categorizing this company as "the next Amazon" or "another Enron" based on superficial similarities? Have I considered the base rates of success/failure for companies in this situation?[ ] Illusion of Control: Am I overestimating my ability to predict complex variables (e.g., macroeconomic trends, competitive responses)? Have I considered a range of outcomes?[ ] Overconfidence Bias: Have I performed a "pre-mortem"? (i.e., Imagined this decision has failed and listed all the reasons why). What is the probability that I am wrong, and what are the consequences?[ ] Loss Aversion: Am I holding onto this position to avoid realizing a loss, even though the fundamentals have deteriorated? Am I selling a winner too early to lock in a gain? Does my decision align with my pre-defined process?[ ] Self-Control Bias: Is this decision driven by short-term market noise or emotion, rather than my long-term strategy and discipline (e.g., as outlined in an Investment Policy Statement)?[ ] Status Quo Bias: Am I holding this position simply out of inertia? If this were a new investment opportunity today, would I still allocate capital to it based on its merits versus other available opportunities?[ ] Endowment Effect: Am I overvaluing this asset simply because I (or the firm) already own it?[ ] Have I had a colleague with a different viewpoint review my analysis and challenge my assumptions (a "red team" review)?[ ] Is my recommendation documented with the key evidence and rationale before knowing the outcome?[ ] Have I clearly distinguished between facts, reasoned assumptions, and speculation in my analysis?