optimism and overconfidencethe illusion of control

clock

In the second of a series of articles, MultiManager looks at how an over-relience on financial modelling can lead investors to overlook the chance nature of the markets

In the first article of this series we defined behavioural finance as descriptive, studying how investors make decisions and, more specifically, focusing on common errors of judgment. The first biases we looked at were our predilections for optimism and our (mistaken) confidence in the likelihood of the outcomes we expect. In this article we'll set out an implication of these two and go on to examine some errors in processing information: anchoring and memory biases. The senior investment officer (SIO) of a large investment bank was making a presentation to a prospective client. 'We are a...

To continue reading this article...

Join Investment Week for free

  • Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
  • Get ahead of regulatory and technological changes affecting fund management
  • Important and breaking news stories selected by the editors delivered straight to your inbox each day
  • Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
  • Be the first to hear about our extensive events schedule and awards programmes

Join now

 

Already an Investment Week
member?

Login

More on Investment

Investment Week reveals winners of Fund Manager of the Year Awards 2025

Investment Week reveals winners of Fund Manager of the Year Awards 2025

Celebrating 30th anniversary of Investment Week

Katrina Lloyd
clock 20 June 2025 • 6 min read
Partner Insight: A full spectrum of 'sustainability focus' labelled funds

Partner Insight: A full spectrum of 'sustainability focus' labelled funds

Piers Hillier and Ed Venner, Royal London Asset Management
clock 20 June 2025 • 4 min read
Charles Schwab UK's Richard Flynn: Young UK investors leading thematic investing charge

Charles Schwab UK's Richard Flynn: Young UK investors leading thematic investing charge

At a 'tipping point'

Richard Flynn
clock 17 June 2025 • 3 min read
Trustpilot