The valence effect of prediction is the tendency for people to simply overestimate the likelihood of good things happening rather than bad things. Valence refers to the positive or negative emotional charge some entity posses.
This finding has been corroborated by dozens of studies. In one straightforward experiment, all other things being equal, participants assigned a higher probability to picking a card that had a smiling face on its reverse side than one which had a frowning face.
The outcome of valence effects may be called wishful thinking. However, in certain situations, the valence effect may actually alter the event in some way so that it indeed results in a positive outcome. For example, in some cases generals have roused up their soldiers to a point where they were able to emerge victorious in battle.
- Nigel Taylor (2000-01-18). "Making Actuaries Less Human: Lessons from Behavioral Finance" (PDF). The Staple Inn Actuarial Society. Retrieved 2009-03-16.