Whether your Final Four picks include Blue Chip mega-caps (Duke, Michigan and Kentucky), or low-cap growth stocks (High Point, Cal Baptist and Prairie View A&M) behavioral biases are on full display when tens of millions of Americans fill out their NCAA men’s basketball tournament brackets.

March Madness is not just a three-week basketball-palooza. It is a classic example of the cognitive biases that derail investors year after year.  Here are four of the most egregious ones:

1. Overconfidence Bias

Ask anyone why they picked a certain team to go deep in the tournament and you will get a confident, well-reasoned answer. They watched three games this season. They read a column about the point guard. Their cousin went to that school. The coach is hot right now. They did well last year.

This is overconfidence bias in its purest form — the tendency to overestimate the accuracy of our predictions based on thin or anecdotal evidence. Behavioral economists have documented this bias extensively. Behavioral psychologist, Daniel Kahneman, described how people consistently overestimate the precision of their forecasts, especially in complex systems with many interacting variables.

Basketball, like markets, is exactly that kind of system. A star player rolls his ankle in warmups. An underdog catches fire from three. A referee misses a call. The outcome is partly skill and partly chaos — and yet tens of millions of people fill out brackets with supreme conviction. Yet no one has ever predicted all 67 games correctly in the same year. In fact, out of 36 million brackets completed on the major online sites in the 2026, NOT ONE bracket remained perfect by  the 44^th game of the 67 game tournament. And there are still four rounds to go.

Investors do the same thing. We read a few earnings reports, catch a segment on financial television, and proceed to make high conviction bets on individual stocks. We forget that we are competing against professionals who do this 12 hours a day with resources and computing power we cannot imagine. The bracket reminds us: confidence and competence are not the same thing.

For many years, Warren Buffett offered $1 billion to anyone who could pick a perfect NCAA bracket and never once paid up. Now Kalshi, the prediction market site is made the same $1 billion offer. They already know they won’t have to pay up in 2026.

2. Recency Bias: Why Last Year’s Champion Gets Too Much Love

In bracket psychology, recent events loom far larger than a full body of evidence would justify. The defending champion University of Florida Gators were a No.1 seed in this year’s tournament and a heavy favorite to make the Final Four. Instead, they got knocked out by No.9 seed, University of Iowa in only the second round. University of Nebraska started the season 20-0 and then dropped seven of their last 13 games heading into the post-season. They fell to a No.4 seed and millions of bracketeers overlooked them as a contender. Yet here are the Huskers in the Sweet 16 having just knocked off Vanderbilt, champions of the highly competitive Southeastern Conference.

Recency bias is equally destructive in investing. When markets are rising, investors pile in, assuming the good times will last indefinitely. When they correct, panic selling takes over. We let the last six months of data override twenty years of historical context.

The data on this is sobering. Dalbar’s annual Quantitative Analysis of Investor Behavior consistently shows that average investors dramatically underperform the indices they invest in — not because the funds are bad, but because investors buy high and sell low, chasing recent performance. They are filling out their financial brackets based on last week’s box scores.

3. Confirmation Bias: Rooting for Your Pick to Be Right

Once you have committed to a bracket pick, something strange happens. You start finding evidence that supports it everywhere. TV analyst Charles Barkley calls your team a “sleeper to watch” and it feels like vindication. But when pundit Seth Greenberg questions them, you instantly dismiss his take on your team, even if his argument is stronger. You are no longer evaluating information objectively — you are prosecuting a case for your predetermined conclusion.

Confirmation bias is one of the most dangerous land mines in investing. Once we own a stock, we unconsciously filter news through the lens of ownership. Good earnings confirm our genius. Bad news gets rationalized as temporary. We stop asking “should I own this?” and start asking “why should I continue to own this?” — a subtle but devastating shift.

Before you finalize a bracket pick, read the case for the other team. Before you double down on a position, write out a serious bear case. The goal is not pessimism — it is intellectual honesty.

4. Loss Aversion

Research suggests most people feel the pain of the loss roughly twice as intensely as the joy of a gain. Kahneman called this “loss aversion,” and he showed it is hardwired into our brains from birth.

In March Madness, loss aversion drives people to pick favorites relentlessly, even when the expected value of an upset pick is higher. We protect our bracket’s survival rather than optimizing for winning the pool. We anchor to our initial picks long after they should be reconsidered.

For investors, loss aversion leads to holding losing stocks far too long — hoping to “get back to breakeven” — and selling winners prematurely to lock in gains. Both behaviors sacrifice expected returns in service of emotional comfort. The result is a portfolio shaped more by feelings than by fundamentals.

How March Madness Can Make Us Better Investors

The most successful bracket players — and investors — share a few key traits.

1. They diversify their picks rather than over-concentrating on one narrative.

2. They respect base rates: historically, No. 1 seeds win the national championship more often than all other seeds combined. They manage their downside and stay in the game long enough for their process to pay off.

3. They also know when to trust the structure over the story. The tournament bracket is a process. A well-constructed investment policy statement is a process. Both exist to protect us from ourselves in high-emotion moments.

Before you submit your next bracket or make your next investment decision ask yourself: ”Am I making this pick because the data supports it, or because I watched them play two weeks ago and they outplayed their conference rivals with a better record? Am I buying this stock because I have a thesis, or because everyone on my feed is talking about it?”

Conclusion

March Madness lasts three weeks. The behavioral biases it exposes can last a lifetime. The court just makes it more obvious than a brokerage account does.

#Marchmadness, #NCAAbasketball, #behavioralbias, #investing

First let me tell you why I love the annual NCAA men’s Division I basketball tournament (aka March Madness). It’s the ultimate reality show. Where else can little known universities such as St. Peters, Loyola of Chicago, Murray State, Weber State, Florida Gulf Coast and Valparaiso suddenly jump into the national limelight with upset wins over perennial powerhouses.

If you don’t think March Madness success has much to do with a school’s brand recognition or athletic recruiting, think again. I know it’s hard to believe but 20 years ago, no one outside of eastern Washington had heard of Gonzaga University. Now the Zags are a national powerhouse. In fact, they’re the No.1 ranked team in the entire country ahead of Kentucky, UCLA, Kansas, Duke, North Carolina and all the Big Ten universities.

Don’t think that helps a school’s brand? Since 1999 applications to Gonzaga have increased 300 percent and enrollment has increased by  more than 86 percent. Hmm.

This year’s “Cinderella” team has been tiny St. Peter’s University of Jersey City, NJ (undergrad enrollment 2,200), The Peacocks upset mighty Kentucky (31,000 undergraduates) in the first round and then defeated former Cinderella Murray State in the second round to remain one of only 16 teams left in the tournament. Only 1.5 percent of brackets had the “Peacocks” advancing to the “Sweet 16.” St. Peters head coach Shaheen Holloway earns a fraction of what the lowest paid assistant in the Kentucky program earns.

What’s not to like?

St. Peter’s president, Eugene Cornacchia, told the North Jersey media “For our whole community, this is a seminal moment in our history. We can’t put $8-10 million into the (basketball) program,” [referring to Kentucky?] “but nonetheless you see what we can do if you have a great coach and players who are hard-working and committed. This is truly a miracle story.”

Not only did the St. Peters website crash after the win over Kentucky, but Cornacchia said the school has already seen increased applications from students. “There’s just been an outpouring of media attention across the country that has been unbelievable. Now I know why they call it March Madness… We’ve been hearing from people around the country about our T-shirts. We ran out real fast.”

Bracketology is not an exact science

Feel good stories aside, I love filling out the tournament brackets as do 20 million other sports fans, office workers, lodge buddies, fraternity brothers and millions of other people who never watch college hoops the rest of the year. Filling out brackets can be great for office morale, despite the drop in productivity. Plus, the tourney is a great reality show. It’s got heroes and villains, alliances and backstabbing. There’s no best of seven. It’s single-elimination win or go home. Just pick which team you think will win each game and each round. It couldn’t be easier. But it’s not — at least for humans.

There’s no shortage of information to make an informed decision and you don’t have to be an “accredited” gambler to play. It’s almost impossible NOT to find a free printable bracket on the web. You get the official NCAA seeding number for each team (ranked 1 through 16). You get their season record. The Vegas odds for each game are everywhere on the web. You can even get injury reports, stats for each player, and each team’s national ranking on two-dozen common metrics. It’s all publicly available and free of charge.

Yet nobody – NOBODY — seems able to fill out a perfect or even near-perfect bracket. This year, not a single one of the 20 million brackets filled out on the Yahoo, Capital One or CBS Sportline bracket challenges were correct after the first two rounds of the tournament. In fact, only one of the 20 million brackets had even 15 of the remaining “Sweet 16” correct and only .001 percent had even 14 out of 16 teams remaining.

As with stock picking, humans are just lousy identifiers of winners, even when you have a wealth of information, years of experience and high-powered computers at your disposal. Here’s another dirty secret. Despite all the upsets every year, you can do darn well just by picking the favored teams (i.e., the higher seeded ones). It’s like investing in index funds – unmanaged and emotion-free.

You’ll consistently finish in the 75^th percentile of your office pool just by picking the large cap favorites. This year that unmanaged “set it and forget it” strategy would put you in the 91^st percentile as we enter the Sweet 16. Sure, you need a few low-ranked small caps and under-valued “value picks” to score some bonus points in the early rounds, but by the time we got to the Elite 8 and Final Four, the big boys tend to rise to the top.

Going back to 1985, #1 Seeds have won the national title about two-thirds of the time (23 out of 36). That’s more than all the other seeds combined. Teams seeded #2 have won the title five times, #3 seeds have won four times and then just a smattering of one-offs for the remaining years. No team seeded 9^th or lower has ever won the tournament.

So how much alpha are human bracketologists adding? Not much. Just like active managers. That’s what makes March Madness fun – especially for behavioral finance observers like me. Just don’t put real money into your March Madness wagers.

Conclusion

Even with perfect information and a level playing field, humans just can’t override their emotions when it comes to March Madness. Same goes for the markets. I’m okay with that and so is my wallet.

Don’t agree? Tell me why.

Here’s how you can support the people of Ukraine

First let me tell you why I love the annual NCAA men’s Division I basketball tournament (aka March Madness). It’s the ultimate reality show. Where else can little known universities such as St. Peters, Loyola of Chicago, Murray State, Weber State, Florida Gulf Coast and Valparaiso suddenly jump into the national limelight with upset wins over perennial powerhouses.

If you don’t think March Madness success has much to do with a school’s brand recognition or athletic recruiting, think again. I know it’s hard to believe but 20 years ago, no one outside of eastern Washington had heard of Gonzaga University. Now the Zags are a national powerhouse. In fact, they’re the No.1 ranked team in the entire country ahead of Kentucky, UCLA, Kansas, Duke, North Carolina and all the Big Ten universities.

Don’t think that helps a school’s brand? Since 1999 applications to Gonzaga have increased 300 percent and enrollment has increased by  more than 86 percent. Hmm.

This year’s “Cinderella” team has been tiny St. Peter’s University of Jersey City, NJ (undergrad enrollment 2,200), The Peacocks upset mighty Kentucky (31,000 undergraduates) in the first round and then defeated former Cinderella Murray State in the second round to remain one of only 16 teams left in the tournament. Only 1.5 percent of brackets had the “Peacocks” advancing to the “Sweet 16.” St. Peters head coach Shaheen Holloway earns a fraction of what the lowest paid assistant in the Kentucky program earns.

What’s not to like?

St. Peter’s president, Eugene Cornacchia, told the North Jersey media “For our whole community, this is a seminal moment in our history. We can’t put $8-10 million into the (basketball) program,” [referring to Kentucky?] “but nonetheless you see what we can do if you have a great coach and players who are hard-working and committed. This is truly a miracle story.”

Not only did the St. Peters website crash after the win over Kentucky, but Cornacchia said the school has already seen increased applications from students. “There’s just been an outpouring of media attention across the country that has been unbelievable. Now I know why they call it March Madness… We’ve been hearing from people around the country about our T-shirts. We ran out real fast.”

Bracketology is not an exact science

Feel good stories aside, I love filling out the tournament brackets as do 20 million other sports fans, office workers, lodge buddies, fraternity brothers and millions of other people who never watch college hoops the rest of the year. Filling out brackets can be great for office morale, despite the drop in productivity. Plus, the tourney is a great reality show. It’s got heroes and villains, alliances and backstabbing. There’s no best of seven. It’s single-elimination win or go home. Just pick which team you think will win each game and each round. It couldn’t be easier. But it’s not — at least for humans.

There’s no shortage of information to make an informed decision and you don’t have to be an “accredited” gambler to play. It’s almost impossible NOT to find a free printable bracket on the web. You get the official NCAA seeding number for each team (ranked 1 through 16). You get their season record. The Vegas odds for each game are everywhere on the web. You can even get injury reports, stats for each player, and each team’s national ranking on two-dozen common metrics. It’s all publicly available and free of charge.

Yet nobody – NOBODY — seems able to fill out a perfect or even near-perfect bracket. This year, not a single one of the 20 million brackets filled out on the Yahoo, Capital One or CBS Sportline bracket challenges were correct after the first two rounds of the tournament. In fact, only one of the 20 million brackets had even 15 of the remaining “Sweet 16” correct and only .001 percent had even 14 out of 16 teams remaining.

As with stock picking, humans are just lousy identifiers of winners, even when you have a wealth of information, years of experience and high-powered computers at your disposal. Here’s another dirty secret. Despite all the upsets every year, you can do darn well just by picking the favored teams (i.e., the higher seeded ones). It’s like investing in index funds – unmanaged and emotion-free.

You’ll consistently finish in the 75^th percentile of your office pool just by picking the large cap favorites. This year that unmanaged “set it and forget it” strategy would put you in the 91^st percentile as we enter the Sweet 16. Sure, you need a few low-ranked small caps and under-valued “value picks” to score some bonus points in the early rounds, but by the time we got to the Elite 8 and Final Four, the big boys tend to rise to the top.

Going back to 1985, #1 Seeds have won the national title about two-thirds of the time (23 out of 36). That’s more than all the other seeds combined. Teams seeded #2 have won the title five times, #3 seeds have won four times and then just a smattering of one-offs for the remaining years. No team seeded 9^th or lower has ever won the tournament.

So how much alpha are human bracketologists adding? Not much. Just like active managers. That’s what makes March Madness fun – especially for behavioral finance observers like me. Just don’t put real money into your March Madness wagers.

Conclusion

Even with perfect information and a level playing field, humans just can’t override their emotions when it comes to March Madness. Same goes for the markets. I’m okay with that and so is my wallet.

Don’t agree? Tell me why.

Here’s how you can support the people of Ukraine

#marchmadness, #bracketology, #stockpicking, #ncaabasketball, #StPeters