Happiness causes over-optimism which causes over-trading. Repeat until crash occurs.Optimistic Fools People who are happy are more confident and expect to make more money by trading, and anticipate taking lower risks in doing so. This result ought to be enough to depress most people, but most people are optimistic and don’t depress easily. This is especially true if they make money on their random trades, because that makes them happier, more optimistic and more prone to trading. Even better, over-optimistic people are more socially popular and therefore more likely to be imitated. Whether any of this will really make anyone happier is doubtful, but we can but hope. It certainly won’t make for better investors. Egos at Large The research that investors tend to be overconfident is pretty strong. We covered a summary of the evidence in Overconfidence and Over Optimism: investors overtrade and the amount they overtrade is related to their degree of overconfidence. ...