Self attribution bias, Assignments of Finance

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SELF SERVING BIAS

By: Purnima Prasad MBA-IB 27

DEFINITION

• (^) Self attribution bias or Self serving bias refers to the tendency of investors to ascribe their investment successes to innate aspects such as talent, or foresight or aptitude, while often blaming investment losses on outside influences such as bad luck.

• (^) Self Enhancing bias
• (^) Self protecting bias

Typ

es

It is the tendency for individuals to take all the credit for their successes while giving little or no credit to other individuals or external factors. Represents the corollary effect which is the irrational denial of responsibility for investment losses.

WHY IT HAPPENS Researchers have identified several different reasons for why the self-serving bias occurs so frequently among individuals.

• (^) Self-Esteem
• (^) Self-presentation
• (^) Natural Optimism

I M P L I C AT I O N S

• (^) Self attribution bias often leads investors to trade far too much that what may be considered prudent.
• (^) It can cause investors to hold under diversified portfolios.

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