Overconfidence
Also called: overconfidence bias
Overrating your own knowledge, skill or ability to predict, which leads to trading too often and taking too much risk.
Overconfident investors trade more, concentrate in fewer holdings and underestimate risk. Studies of individual investors' records have generally found that those who trade most tend to earn less after costs. Rising markets make overconfidence worse, because most investors look skilful when everything is going up.
Learn more in these lessons
- Loss aversion, confirmation bias and overconfidenceWhich mental shortcuts cost investors the most, and what can you do about them?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.