Self-attribution bias could lead your portfolio towards a graveyard

Self-attribution bias could lead your portfolio towards a graveyard

by 5paisa Research Team Last Updated: Dec 15, 2022 - 09:19 pm 30.3k Views
Listen icon

Behavioural finance is one of the growing fields in finance and heuristic or bias is one of the part of it. In this article, we would be understanding the impact of self-attribution bias on investors.

While investing, various things affect the outcome of investments and heuristics or biases is one such thing. According to the studies of behavioural finance, there are a lot of biases that investors carry while investing. In this article, we would be dealing with one such bias called self-attribution bias, the outcome of which might lead to devasting results.

What is self-attribution bias?

In terms of investing, self-attribution bias is a tendency where investors accredit success to their own actions and abilities while refusing to accept the poor investing outcome as their fault.

This does make a difference since investors are less likely to learn from their mistakes and would never acknowledge that they need to be well informed. Let’s say an investor invests in an IT company, but soon after he invests the stock prices of the IT company start falling. So, in this scenario investors rather than blaming the CEO of that company for mismanaging the business or even the market itself for heading downwards, they would blame the friend who told him about the company.

Now let’s look at another scenario. Let’s say this time the investor invests in a banking stock and he gets successful as the stock price of that bank starts rising as soon as he invests. Now to whom would the investor accredit these gains? So, here he attributes to himself. In this scenario, the investor believes that they already knew that the company would prove to be a good investment.

Carrying a self-attribution bias does have a negative impact in the long run as it can certainly lead to unfavourable outcomes. Therefore, while you invest become as objective as possible.

Share Market Today

How do you rate this article?

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage


About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Enjoy 0%* Brokerage with 5paisa
Resend OTP
Please Enter OTP
Mobile No. belongs to

By proceeding, you agree to the T&C.

Latest News
Tata Consumer Share Price 5% Drop Post-Q4 Results: Buy or Sell?

After three consecutive sessions of gains, shares of the FMCG major fell by almost 5% on the BSE in Wednesday’s trade after declaring its Q4 result on Tuesday.

Bajaj Finance Shares Could Surge Another 24%; Emkay Forecasts

Bajaj Finance share price gained nearly a percent on Wednesday after brokerage firm Emkay Global has initiated coverage on the