The self-attribution bias is defined as:
Attribute successful outcomes to their own actions and bad outcomes to external factors. They often exhibit this bias as a means of self-protection or self-enhancement. Investors affected by self-attribution bias may become overconfident.
Seasoned and highly successful investors know that a "rising tide raises all ships". While there is skill in the timing and selection of investments, the degree of skill cannot be mathematically measured. There is also always a degree of randomness in success. The truth is that the answer lies somewhere between skill and randomness.
The self-attribution bias is common at market tops.
What can be done about it? Understand that success in investments, like many things in life, is not a clear cause and effect relationship. Many a person have taken inadvisable actions that have led to their demise just when they become excessively confident. The human psyche is wired to become over-confident when success is perceived. This wiring is an inate cognitive bias of being human. Guard against the personal tendency to immerse in over-confidence and remain grounded by continually questioning personal conclusions.
