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The tendency to give too much weight to recent events, assuming that whatever just happened will keep happening.
Why It Matters
After a sharp drop on scary news, recency bias whispers that the drop will continue forever. After a long calm stretch, it whispers that nothing can go wrong. Both feelings fade, but they can drive big decisions in the moment. Recognizing recency bias helps you weigh a headline against a longer history rather than only the last few days.
Key Points
- The most recent move feels the most permanent, even when it rarely is
- It fuels both panic near lows and complacency near highs
- Zooming out to a multi-year chart is a simple counterweight
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The tendency to give too much weight to recent events, assuming that whatever just happened will keep happening. After a sharp drop on scary news, recency bias whispers that the drop will continue forever. After a long calm stretch, it whispers that nothing can go wrong.
After a sharp drop on scary news, recency bias whispers that the drop will continue forever. After a long calm stretch, it whispers that nothing can go wrong. Both feelings fade, but they can drive big decisions in the moment. Recognizing recency bias helps you weigh a headline against a longer history rather than only the last few days.
The most recent move feels the most permanent, even when it rarely is
It fuels both panic near lows and complacency near highs
Zooming out to a multi-year chart is a simple counterweight