Looking on the (B)right side of life: Cognitive ability and miscalibrated financial expectations

Research output: Contribution to journalArticlepeer-review


It is a puzzle why humans tend toward unrealistic optimism, as it can lead to excessively risky behavior and a failure to take precautionary action. Using data from a large nationally representative U.K. sample (Formula presented.) our claim is that optimism bias is partly a consequence of low cognition—as measured by a broad range of cognitive skills, including memory, verbal fluency, fluid reasoning and numerical reasoning. We operationalize unrealistic optimism as the difference between a person’s financial expectation and the financial realization that follows, measured annually over a decade. All else being equal, those highest on cognitive ability experience a 22% (53.2%) increase in the probability of realism (pessimism) and a 34.8% reduction in optimism compared with those lowest on cognitive ability. This suggests that the negative consequences of an excessively optimistic mindset may, in part, be a side product of the true driver, low cognitive ability.

Original languageEnglish
Number of pages13
JournalPersonality and Social Psychology Bulletin
Early online date10 Nov 2023
Publication statusE-pub ahead of print - 10 Nov 2023

Bibliographical note

The author(s) received no financial support for the research, author-ship, and/or publication of this article


  • cognitive ability
  • decision-making
  • unrealistic optimism

ASJC Scopus subject areas

  • Social Psychology


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