Recency Bias: Why the Latest News Hijacks Your Judgment
On March 10, 2000, the NASDAQ peaked at 5,048. Investors had poured money in throughout 1999 chasing recent spectacular gains. By October 2002, it had fallen 78%. Those same investors sold near the bottom, fleeing recent losses. Recency bias — the brain's tendency to overweight recent events — is one of the most costly cognitive errors in finance, forecasting, and everyday life.