Self-attribution bias in consumer financial decision-making: How investment returns affect individuals’ belief in skill

Self-attribution bias is a long-standing concept in consumer research and refers to individuals’ tendency to attribute successes to personal skills and failures to factors beyond their control. Recently, this bias is also being studied in household finance research and is considered to underlie and reinforce investor overconfidence. To date, however, the existence of self-attribution bias amongst individual investors is not directly empirically tested. Specifically, it remains unclear whether good (vs. bad) returns make investors believe more (vs. less) strongly that skills drive their performance. Matching survey and trading data of brokerage clients, we find that: (1) investors with above-median (vs. below-median) returns agree more (vs. less) with a statement claiming that their recent performance accurately reflects their investment skills; (2) the higher (vs. lower) the returns in a previous period are, the more (vs. less) investors agree; and (3) while individual returns relate to agreement, market returns have no effect.