Which type of bias describes how investors may undervalue new evidence due to their existing beliefs?

The correct answer is conservatism bias. This bias occurs when investors are slow to adjust their beliefs or opinions in response to new evidence. Instead of incorporating new information quickly into their decision-making process, they tend to cling to their existing beliefs, leading to an undervaluation of new data.

In the context of financial markets, this can result in missed opportunities or poor investment decisions, as investors may ignore data that contradicts their preconceived notions or previous experiences. This is particularly important to recognize in technical analysis, where traders need to adapt to changing market conditions rather than being stuck in outdated views.

Understanding conservatism bias can help investors adjust their strategies to be more responsive to new information, ultimately contributing to better investment outcomes.