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Overconfidence effect

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The overconfidence effect refers to the human tendency to be more confident in one's behaviours, attributes and physical characteristics than one ought to be. In a recent survey, over 70% of respondents classified themselves as "better than average" drivers. Overconfidence is most likely after a series of "successes" and can lead to excessive risk taking. This is sometimes used to explain why most investors have too little diversification.

See alsoEdit


  • Shefrin, H. (2002). Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing. Oxford University Press.
  • Gilovich, T., Griffin D. & Kahneman, D. (Eds.). (2002). Heuristics and biases: The psychology of intuitive judgment. Cambridge, UK: Cambridge University Press. ISBN 0521796792

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