GLOSSARY TERM
Recency Bias
Recency bias means giving too much importance to what has happened recently.
What does this mean in practice?
After a strong market rise, people may expect gains to continue. After a crash, they may expect losses to continue. Recent events feel more powerful and more relevant than long-term history, even when they are not a reliable guide to the future.
Example
An investor avoids stocks completely after one bad year because the recent decline feels more important than decades of market history.
Why it matters
Recency bias can distort decisions and make people abandon sensible plans based on short-term experiences. Recognising it can make it easier to stay focused on the bigger picture.
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