What is Recency Bias?
Recency bias is giving recent events more weight than they deserve when forecasting what comes next. After a strong run, people expect more of the same; after a crash, they expect more pain. Research on investor surveys finds that return expectations tend to follow recent returns.
Why Recency Bias matters
Extrapolating the last few months encourages buying after rises and selling after falls, which is the reverse of buying low.