More information does not lead to improved accuracy

Must have more data! Need to increase my information edge! This is usually the cry of any analysts because, of course, more data and information are better than less data. If I have one more piece of data, I can solve the puzzle of what will happen next. In reality, the issue of marginal increases in information is more complex. 

It has been found that more information does not lead to improved accuracy. Accuracy remains stable as the amount of information increases; however, the level of confidence increases with more information. My forecast does not become better, but I feel more confident that it is true. This has important investment implications because our sizing of positions is often driven by confidence. We will likely take bigger bets although our chance of being right may be the same. This does not mean those are better bets.

The overconfidence bias is real although more works needs to be done to determine under what conditions it will occur. In highly uncertain environments, does more information improve accuracy and is increased confidence good.  Overconfidence is tied with other biases. As we add more information, we are likely to further confirm our opinions and not look for information to contradict our views. 

This bias does not argue for ignorance, but it does tell us that looking for more information will our views improved It just gets us to feel better about the prediction or choice that we will make. Do not over think. Do not over analyze. Realize that more information will make you feel better about your choice but does not improve the outcome.