Recency bias
Also called: extrapolating recent returns
Giving recent events too much weight and expecting them to continue.
After several strong years, investors tend to expect more; after a crash, they expect more falls. This leads them to buy after rises and sell after falls, so their own returns can trail the funds they invest in.
Learn more in these lessons
- Herd behaviour and recency biasWhy do investors pile in at the top and sell at the bottom?
- Investment mistakes and lessons from historyWhat mistakes keep repeating in market history, and how can you avoid them?
Related terms
Spotted a mistake or something unclear? Report it by email. Here is how corrections work.