Survivorsbip Bias in Performance Studies persistence of performance documented in Tables 1 and 2 is not necessarily any indication of skill among surviving managers. To the extent that survivorship depends on past returns,ranking managers who survive by realized returns may induce an apparent persistence in performance.Survivorship implies that managers will be selected according to total risk.One way of explaining the Table 1 results is to observe that the set of managers studied represent a heterogeneous mix of management styles.Each management style is characterized by a certain vector of risk attributes.By examining the survivors,we are really only looking at those styles that were ex post successful.It may appear that one resolution of this problem is to concentrate on only one defined management style.There are two problems with this approach.In the first instance,we have to be careful to define the style sufficiently broadly that there are more than a few managers represented.In the second instance,we may exac- erbate the effect if our definition of manager style is synonymous with taking high total risk positions. We only observe the performance of managers who survive per. formance evaluations.The purpose of this article is to examine the extent to which this fact is sufficient to explain the magnitude of persistence we seem to see in the data.In Section 1,we examine the relationship between total risk differentials and survivorship-induced persistence in performance.In Section 2,we present some numerical results that show that a very small survivorship effect is sufficient to generate a strong and significant appearance of dependence in serial returns.We conclude in Section 3. 1.Relationship between Volatility and Returns Induced by Survivorship There are many possible quite complex sample selection rules.We will look at the implications of one class of these rules.Our purpose in this section is to demonstrate that sample survivorship bias is a force that can lead to persistence in performance rankings.For sim- plicity,assume all distributions are atomless.Our tool is the following lemma. rather than one-period performance is used as a survival criterion.The analysis of a strategic response is beyond the scope of this article.A possible strategic response is for surviving managers who are subject to the same survival criterion to converge in residual risk characteristics.The results in the next section require only that the ranking of managers by residual risk be constant.This kind of strategic response would also tend to mitigate the effect.This analysis is complicated by the fact that survival criteria are not necessarily the same for all managers. 5611