Course 407: Psychology and Investing
Self-Handicapping
In this course
1 Introduction
2 Overconfidence
3 Selective Memory
4 Self-Handicapping
5 Loss Aversion
6 Sunk Costs
7 Anchoring
8 Confirmation Bias
9 Mental Accounting
10 Framing Effect
11 Herding
12 The Bottom Line

Researchers have also observed a behavior that could be considered the opposite of overconfidence. Self-handicapping bias occurs when we try to explain any possible future poor performance with a reason that may or may not be true.

An example of self-handicapping is when we say we're not feeling good prior to a presentation, so if the presentation doesn't go well, we'll have an explanation. Or it's when we confess to our ankle being sore just before running on the field for a big game. If we don't quite play well, maybe it's because our ankle was hurting.

As investors, we may also succumb to self-handicapping, perhaps by admitting that we didn't spend as much time researching a stock as we normally had done in the past, just in case the investment doesn't turn out quite as well as expected. Both overconfidence and self-handicapping behaviors are common among investors, but they aren't the only negative tendencies that can impact our overall investing success.

Next: Loss Aversion >>


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