This article has been reviewed according to Science X's editorial process and policies. Editors have highlighted the following attributes while ensuring the content's credibility: Say you buy shares in a company. The price climbs and months later you sell for a healthy profit.
Ask why it worked, and the answer is often some version of "I made a good call." Now imagine the trade had lost money instead. Would you be as quick to blame your own judgment? We may point to bad timing, a jittery market, anything but ourselves.
Psychologists call this "self-attribution bias": crediting ourselves for good outcomes, blaming something else for bad ones. This bias matters more now that trading apps have made it easier for people with no formal training in finance to manage their own investments. Many of these apps offer tax-efficient accounts, such as stocks and shares ISAs and self-invested personal pensions.
They promote the tax advantages alongside low fees and sign-up incentives. My colleagues and I explore this in our latest study, which examines self-attribution alongside two related biases—overconfidence and loss aversion—among people training to work in finance. Behavioral finance exists as a subject because traditional theory, which assumes investors act rationally, struggles to explain why markets are prone to bubbles, or why we cling to losing positions long after we should sell.
Self-attribution, overconfidence (an inflated sense of our ability relative to others) and loss aversion (feeling a loss more keenly than an equivalent gain) sit at the center of it. It's a subject now taught at more than 40 U.K. universities. Yet there's been surprisingly little research into teaching students to recognize these biases in their own decisions, rather than just learning the theory.
We studied the financial decisions of 72 postgraduate students taking a master's degree in finance and investment at the University of South Wales. They came from a range of countries, mainly Nigeria, Sri Lanka and Bangladesh. Most were in their 30s or older.
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