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Showing posts with label lake wobegon effect. Show all posts
Showing posts with label lake wobegon effect. Show all posts

Thursday, 7 May 2009

Overconfidence and Over Optimism

Behavioural Biases (1): Overconfidence and Over Optimism

Most of us are way too confident about our ability to foresee the future and overwhelmingly too optimistic in our forecasts. This finding holds across all disciplines, for both professionals and non-professionals with the exceptions of weather forecasters and horse handicappers.

To add the problems it also turns out that the executives running the companies we invest in so hopefully suffer from the same problems. Overconfident, over optimistic investors investing in companies run by overconfident, over optimistic executives. What could possibly go wrong?