What Is Overconfidence Bias?

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Review of Overconfidence Bias Human beings are models of overconfident. Overconfidence is a person’s decision-making that relays bias to seek confirming evidence. People believe that they are better at sports than others, better eye-witnesses, and even better drivers than the average. According to Halpern (2014), a lot of people don’t improve on the way they perceive and decide on situations, due to the misconception that they are already making the right decisions. For example, imagine going on a family road trip with an overconfident relative. This relative is so overconfident in their navigation skills, that instead of using a map, or a navigation system, and refuse to ask for help if they end up getting lost on the road. Another example
Individuals are not the only victims of overconfidence. Most people think that when individuals become a group, more collective knowledge will be present, therefore there won’t be overconfidence. According to Minson and Muller (2012), a big disadvantage of groups is that the participants in the group are collectively overconfident, leading to the disregard of information that might cause them to change their decisions. Overconfidence not only effect regular individuals and groups, but they also effect experts and financial investors. An expert is a person who has comprehensive knowledge in a subject or area of study. According to Silver (2011), experts have trouble with recognizing or acknowledging uncertainty, they underestimate the chances that they can be wrong. Overconfidence often hurts financial investors because they underestimate the stock markets unpredictability. Stock markets fluctuate every day, some days for the better, some days for the worse. But on the days, it fluctuates for the benefit of the investor, they attribute that success to their personal skills. According to Gervais and Odean, overconfident investors trade their stocks way too much because they believe it will lead to a better financial gain, when in reality they are hurting they chances to make more

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