◐ Behavioral
◆ The PatternBelieving you know more than you do.
Overconfidence — systematically overestimating one's ability to predict, analyze, and control outcomes.
Three types:
1. Overestimation: "I'll beat the market" (93% think they're above-average drivers)
2. Overprecision: Confidence intervals too narrow ("I'm 95% sure it'll hit $50" — it won't)
3. Overplacement: "I'm a better trader than most people"
1. Overestimation: "I'll beat the market" (93% think they're above-average drivers)
2. Overprecision: Confidence intervals too narrow ("I'm 95% sure it'll hit $50" — it won't)
3. Overplacement: "I'm a better trader than most people"
Barber & Odean (2000): the most frequent traders earned 7.1% less annually than the least frequent. Overconfidence → overtrading → underperformance.
Pattern bridge: Too-narrow confidence intervals from too much certainty. In statistics, this is literally miscalibrated confidence intervals. In ML, low bias, high variance — the overfit model that’s sure it’s right.