Investors can get swept away by the fear or euphoria of the recent past — and it often costs them financially.
"Recency bias" is the tendency to put too much emphasis on recent events, like a stock-market rout or the meteoric rise of bitcoin or a meme stock like GameStop, for example.
Investor choices are guided by these short-term events — which may be counter to their best interests, as is often the case when selling stocks in a panic.
"Would you want to go for a long ocean swim after watching 'Jaws'?
Probably not, even though the actual risk of being attacked by a shark is infinitesimally small," wrote Omar Aguilar, CEO and chief investment officer at Schwab Asset Management.
Persons:
Steven Spielberg's, Omar Aguilar
Organizations:
GameStop, Finance, Schwab Asset Management