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This Test Proves You’re Overconfident

Much has been written about the perils of overconfidence in investing. Nobel laureate Daniel Kahneman reported one compelling study in his book, Thinking, Fast and Slow.

CFOs are overconfident

You might think CFOs of large corporations would have valuable insight about something as basic as projecting the returns of the S&P 500 index. The data, however, proves otherwise. Researchers from Duke University analyzed 11,600 forecasts by CFOs. They asked for both projected returns and the level of returns that participants were 90 percent confident were too high and too low. More than 67 percent of the actual returns were outside the estimated range. The CFOs were supremely confident, and often wrong.

Consider your assumptions

Read the rest of the article at The Huffington Post.

 

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