Say you buy shares in a company. The price climbs and months later you sell for a healthy profit. Ask why it worked, and the answer is often some version of “I made a good call”. Now imagine the trade had lost money instead. Would you be as quick to blame your own judgment? Many of us wouldn’t. We may point to bad timing, a jittery market, anything but ourselves.

Psychologists call this “self-attribution bias”. Crediting ourselves for good outcomes, blaming something else for bad ones.

This bias matters more now that trading apps have made it easier for people with no formal training in finance to manage their own investments. Many of these apps offer tax-efficient accounts, such as stocks and shares Isas and self-invested personal pensions. They promote the tax advantages alongside low fees and sign-up incentives.

My colleagues and I explore this in our latest study, which examines self-attribution alongside two related biases – overconfidence and loss aversion – among people training to work in finance.

Behavioural finance exists as a subject because traditional theory, which assumes investors act rationally, struggles to explain why markets are prone to bubbles, or why we cling to losing positions long after we should sell. Self-attribution, overconfidence (an inflated sense of our ability relative to others) and loss aversion (feeling a loss more keenly than an equivalent gain) sit at the centre of it.

It’s a subject now taught at more than 40 UK universities. Yet there’s been surprisingly little research into teaching students to recognise these biases in their own decisions, rather than just learning the theory.

Knowledge doesn’t make us immune

We studied the financial decisions of 72 postgraduate students taking an MSc in finance and investment at the University of South Wales. They came from a range of countries, mainly Nigeria, Sri Lanka and Bangladesh. Most were in their 30s or older. About 40% had never traded with real money.

Over four weeks, the students learned about trading psychology and then took part in a series of simulated trading exercises. This research project ended with a final trading game that counted towards their assessment. They also completed questionnaires and looked back at their own trading decisions to identify possible biases.

Before the final trading game, we asked students how well they expected to perform. Afterwards, we asked whether their actual result reflected their own trading skill. The difference was striking. More than 80% of students who performed better than expected said their result reflected their skill.

Among those who performed worse than expected, only about 16% said the same. Overall, nearly 70% of students acknowledged that they tended to take more credit for success than for failure.

We also found signs of overconfidence. For example, 84% of students expected to finish in the top half of the group, even though, by definition, no more than half could do so. Even among students who said they rarely followed financial news, everyone rated their understanding of it as at least “fair”.

We also found evidence of loss aversion. Students were asked to imagine two coin flips, risking £25 on one and £100 on the other, and named the smallest prize that would make each worth playing. Across both flips, around 75% asked for more than they stood to lose (indicating loss aversion), broadly in line with findings from research involving people in 53 countries.

It would be reassuring to think people studying for a finance masters – several with real trading experience already – would be less susceptible to these bases. Our results suggest otherwise.

That does not prove financial knowledge makes no difference. We did not compare this group with people who had no financial background. And we measured them once, not as their expertise grew as time progressed.

But it does show that technical, theoretical knowledge of markets was not, by itself, enough to stop these tendencies appearing. These biases are not really about what you know. They are about how the mind processes wins, losses and uncertainty, often automatically, before conscious reasoning gets a look in.

So what can investors do?

There was, however, an encouraging sign after a structured sequence of exercises, comparing predictions against outcomes, reviewing their own trading data and reflecting on decisions. The self-rated understanding of all three biases by students improved significantly.

It is important to note that this measured how well students felt they understood the biases, not their actual knowledge or behaviour. Feeling more aware of a bias is not the same as reliably avoiding it. As the study itself notes, insight is a start, but it doesn’t guarantee different decisions.

None of this means investors are doomed to be led astray by their own psychology, but simply knowing the theory isn’t enough. What seemed to help our students was structure. In other words, writing down what they expected before deciding, then honestly comparing it with what happened, reviewing their own trading history for patterns rather than trusting memory, and also setting rules for buying and selling in advance, not in the heat of the moment.

None of that requires a finance degree. For anyone managing their own pension or investments, the lesson may be simple – be wary of any story where your wins are always down to skill and your losses always down to bad luck.