Investors Psychology :Overconfidence
• 19% of people think they belong to the richest 1% of U.S. households
• 82% of people say they are in the top 30% of safe drivers
• 86% of my Harvard Business School classmates say they are better looking than their classmates
• 68% of lawyers in civil cases believe that their side will prevail
• Doctors consistently overestimate their ability to detect certain diseases
• 81% of new business owners think their business has at least a 70% chance of success, but only 39% think any business like theirs would be likely to succeed
• Graduate students were asked to estimate the time it would take them to finish their thesis under three scenarios: best case, expected, and worst case. The average guesses were 27.4 days, 33.9 days, and 48.6 days, respectively. The actual average turned out to be 55.5 days.
• Mutual fund managers, analysts, and business executives at a conference were asked to write down how much money they would have at retirement and how much the average person in the room would have. The average figures were $5 million and $2.6 million, respectively. The professor who asked the question said that, regardless of the audience, the ratio is always
approximately 2:1 • FSBO (for sale by owner)
• Homeowners overestimate the value of their home and their ability to market it properly, negotiate well, etc.
overconfidance Can lead to excessive portfolio concentration and/or trading
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