Selfattribution bias makes investors attribute successes to their own skill rather than luck from "summary" of The Little Book of Behavioral Investing by James Montier
Self-attribution bias is a common psychological quirk that affects how investors perceive their own successes. When investors experience a positive outcome, such as a profitable trade or investment, they are inclined to attribute that success to their own skill and decision-making abilities. This bias leads investors to believe that their success was a result of their own actions and choices, rather than external factors like luck or market conditions. By attributing success to their own skill, investors may develop an inflated sense of confidence in their abilities. This overconfidence can be dangerous, as it may lead investors to take on more risk than they can handle or make risky investment decisions based on faulty assumptions about their own abilities. In reality, luck often plays a significant role in investment outcomes, and failing to recognize this can lead to costly mistakes. Investors who fall victim to self-attribution bias may be more likely to engage in risky behavior or ignore warning signs that could indicate a looming downturn. By attributing their successes solely to their own skill, investors may fail to learn important lessons from their experiences and may be less prepared to handle future challenges in the market.- Self-attribution bias can have a negative impact on investors' overall performance and decision-making abilities. By recognizing this bias and making an effort to separate luck from skill in their investment outcomes, investors can make more informed and rational decisions that are less influenced by their own biases and assumptions.
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