OVERCONFIDENCE

BIAS Group 4
Mehul Tank
Muskan Goswami
Namrata Nisar
 WHAT IS OVERCONFIDENCE?

SPECIAL
UNWANTED
BELIEVE INTUITION
AND
THEY ARE AND
ILLOGICAL
GIFTED REASONING
FAITH
SKILLS

THEIR
ASSUME TO
SMARTER DECISIONS
HAVE
THAN ALWAYS
SUPERIOR
EVERYONE BETTER
INFORMATI
ELSE THAN
ON
OTHERS
 TYPES OF OVERCONFIDENCE

OVER TIMING
RANKING OPTIMISM

ILLUSION OF DESIRABILIT
CONTROL Y EFFECT
 CAUSES OF OVERCONFIDENCE

SELF ABOVE
FAMILIA
SERVING AVERAGE
RITY
ATTRIBUTION EFFECT
BIAS
BIAS
 IMPACT OF OVERCONFIDENCE BIAS

Ignores
Search for
Negative
Multibagge
Informatio
r Stocks
n

Trades too Underestimates

often Risks
EXAMPLE OF OVERCONFIDENCE BIAS

https://youtu.be/E0X3xxV8upI
 OVERCONFIDENCE = UNDER-PERFORMANCE ?

Overconfidence tends to create the illusion

that past success was result of skills and luck.
100
Price Movements are unpredictable, guessing
75 wrong a few times can impact negatively.
50
Overconfident investors believe their success
25
with a particular strategy or kind of
investment can be repeated.

Overconfidence is the driving force behind

the irrational exuberance that creates a
market crash.
 HOW TO AVOID THIS BIAS

The odds are

Trade Less and overwhelmingly in
Invest More Experience Matters their favor.

Resist the urge to believe

that your information and
intuition are better than
Systematic Investment others in the market.
 FEAR OF BEING WRONG IS ALWAYS HELPFUL

Confidence is strength, but Overconfidence leads us to

mostly a weakness in think investment decisions
investing situation. are less risky than they are.

Ray Dalio - Overconfidence One should consider worst

can lead to disastrous case scenario and minimise
results his risk of loss.
THANK YOU
Group 4
Mehul Tank
Muskan Goswami
Namrata Nisar