Fact, Interpretation, and Confirmation Bias
How to separate facts from interpretations and predictions in your research, why everyone tends to favor evidence that confirms what they already believe, and habits that counter it.
The short version
Research mixes three kinds of statements: facts you can verify, interpretations of what those facts mean, and predictions about the future. Keeping them apart shows where your view could be wrong. Confirmation bias is the tendency to seek out and interpret evidence in ways that favor what you already believe, and investing is full of it: after buying, it's easy to read only good news. Counter it by labeling your notes, writing down the strongest case against you, deciding thesis breakers in advance, and checking claims against primary sources.
By the end of this lesson, you'll be able to
- Classify statements as facts, interpretations, or predictions
- Explain confirmation bias and how it shows up in investing
- Use habits that counter it in your own research
Why this matters
Two people can read the same annual report and reach opposite conclusions, both feeling certain. Usually they agree on the facts and differ on what the facts mean and what will happen next. Knowing which part of your view is fact and which is judgment shows you where you could be wrong. And knowing how your own mind tilts the evidence helps you check it.
Three kinds of statements
| Kind | Example | How to check it |
|---|---|---|
| Fact | Subscription revenue rose from $75 million to $100 million. | Verify it in the filings. |
| Interpretation | The price increase that stuck shows STU Corp has pricing power. | Ask what else could explain the facts. |
| Prediction | Subscriptions will be half of revenue within five years. | Ask what has to be true, and watch whether it happens. |
All three belong in research. The danger is treating an interpretation or a prediction with the confidence a fact deserves. Labeling statements in your notes, even with a simple F, I, or P, makes the difference visible.
The rest of this lesson is for members
Still to come in this lesson: Confirmation bias, Habits that help, the key takeaways, and 2 quiz questions with explanations.
Membership opens every lesson in the curriculum, the capstone projects, the interactive tools, and the members-only channels in the Hyperion Entities Discord. The first lesson of every module stays free.
Go deeper
- Your Own Behavior Is Part of the RiskPart 1: Foundations
- Overconfidence, Recency, and Narrative BiasPart 6: Strategy, Behavior, Accounts, and Taxes
- Keeping a Research Journal coming soonResearch Workshop (depth track)
Notes and sources
- Review of General Psychology, American Psychological Association. Raymond S. Nickerson, Confirmation Bias: A Ubiquitous Phenomenon in Many Guises (1998). Checked 2026-10-01.