Problem
You’re all set to play the market today, positive thinking is your ace in the hole!
Reality
Positive thinking (and a good mood in general), is going to make you feel over confident, according to a study in the Journal of Neuroscience.
Methods
107 university students had to take a thirty-minute quiz featuring twenty trivia questions and ten arithmetic problems. Then, half the quiz takers watched a tranquil video featuring Alaska’s Denali National Park, or part of Robin Williams Live on Broadway.
Then, each participant had to estimate how well they’d done on the quiz. They had real incentives to get it right: they’d get $5 for an exactly correct estimate, $3 for getting within three points, and $1 for getting within six points of the score. Overestimating could hurt just as badly as underestimating.
Results
Men were more confident than women—no surprises there—with men overestimating by four points on average, compared to women’s two points. However, men who watch stand up comedy over Denali overestimated by two more points too. The women were unaffected by being put into a good mood (ha!).
The Takeaway
Maybe you shouldn’t make bets when you’re feeling good. Maybe you should remember to temper your feelings. Or maybe you shouldn’t watch Robin Williams videos before picking your stocks. No matter what, keep in mind: your good mood has a downside.
