Behavioral Insights into Investing: Overconfidence Bias

In this episode of My Two Cents, we explore overconfidence bias: the tendency for investors to overestimate what they know, how well they can predict the market, or how skilled they are at picking winners. Listeners will learn how overconfidence can lead to too much trading, too much risk, and too little attention to what could go wrong.Research mentioned in this episode:Barber, B. M., & Odean, T. (2000). “Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors.” https://faculty.haas.berkeley.edu/odean/papers/returns/individual_investor_performance_final.pdfGao, H., Shi, D., & Zhao, B. (2021). “Does Good Luck Make People Overconfident? Evidence from a Natural Experiment in the Stock Market.” https://www.sciencedirect.com/science/article/abs/pii/S0929119921000547Hoffmann, A. O. I., & Post, T. (2014). “Self-Attribution Bias in Consumer Financial Decision-Making: How Investment Returns Affect Individuals’ Belief in Skill.” https://www.sciencedirect.com/science/article/abs/pii/S2214804314000597