Curriculum·S208 Behavioral Finance and the Operator·about 31 min
Overconfidence, measured
By the end of this lesson you can
- →Distinguish confidence from calibration, and explain why only the second can be measured
- →Report what happens to persistence in a measured population, including whether learning occurs
- →Score your own calibration from recorded predictions and compute the correction
- →Explain why overconfidence is the bias with the largest measured cost, through position sizing
Sophomore · enrolled learners
This lesson opens with Day trading for a living, measured.
- What happened
- Chague, De-Losso and Giovannetti examined regulator records covering 19,646 individuals who began day trading Brazilian mini-Ibovespa futures between 2013 and 2015, following them through 2017 in a market that was the third largest of its kind by volume. Of those who persisted for more than 300 days, 97 percent lost money. Only 1.1 percent earned more than the Brazilian minimum wage and only 0.5 percent earned more than the starting salary of a bank teller, both with substantial risk. The single best performer earned around US$310 a day against a standard deviation of US$2,560. The authors also reported finding no evidence of learning by day trading.
- The decision point
- Persistence is normally read as evidence of skill: somebody still doing this after 300 days must have found something. The data says the opposite, and the finding about learning is the one that matters most. The people who continued were not converging on competence, so the confidence that kept them at the desk was tracking their effort rather than their results.
What you will be able to answer
- →What is the difference between confidence and calibration?
- →What did the day trading study find about learning?
- →Why is overconfidence the most expensive bias?
- →How do you correct calibration?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101
- https://ideas.repec.org/p/spa/wpaper/2019wpecon47.html
- https://onlinelibrary.wiley.com/doi/abs/10.1111/0022-1082.00226
- https://www.dalbar.com/PressReleases/doc/QAIB2024_PR.pdf
Confidence high·Volatility low·Reviewed 2026-08-06·Owner unassigned
Contested
The Brazilian study covers day trading of index futures, which is a leveraged short-horizon activity, and its findings do not transfer directly to unleveraged holding. It is used here for what it establishes about persistence, confidence and learning, which is the transferable part.
No comparable study of this size and rigour exists for crypto specifically. The honest position is that the mechanism is well established in adjacent markets and the crypto magnitude is unmeasured.