Overconfidence effect

The overconfidence effect is a cognitive bias in which confidence in judgments or abilities exceeds actual accuracy or performance.

Overprecision: Excessive certainty that a judgment or estimate is more precise than the evidence warrants. It captures overconfidence expressed as confidence intervals that are too narrow.
Metacognition: The monitoring and regulation of one's own cognitive processes. Overconfidence is a failure of monitoring how well one's judgments are supported.
Daniel Kahneman: An Israeli-American psychologist whose research on judgment and decision-making helped establish behavioral economics. His work helped frame overconfidence as a systematic feature of human judgment.
Financial decision-making: The choices individuals and institutions make about investing, borrowing, saving, and managing financial risk. Investors' excessive confidence can encourage concentrated portfolios and frequent trading.
Impostor phenomenon: A persistent belief among capable people that they are inadequate or will be exposed as frauds. It describes underconfidence, the opposite direction of self-assessment error.
Overestimation: A bias in which people rate their own performance or ability higher than it is. It concerns inflated self-assessments rather than certainty about a specific estimate.
Confidence interval: A range of values constructed by a statistical method that captures a parameter at a stated long-run frequency. People's subjective ranges often fail to achieve their claimed coverage.
Amos Tversky: An Israeli cognitive psychologist who studied heuristics and biases with Daniel Kahneman. His research helped document confidence errors in probability judgments.
Entrepreneurship: The creation and development of ventures that pursue economic or social opportunities. Founders' confidence in forecasts can shape entry decisions and resource commitments.
Hindsight bias: The tendency to see an outcome as having been predictable after learning that it occurred. It inflates perceived past foresight, unlike overconfidence measured before outcomes are known.

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