How biases impact our investments decisions
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GUEST – Simon Brown – Founder of JustOneLap
RECENCY BIAS, WHERE THE EVENTS OF RIGHT NOW CLOUD OUR MEMORY OF THE MORE DISTANT PAST AND THOUGHTS OF THE FUTURE, IS A DANGEROUS FACTOR IN DECISION-MAKING, WHETHER YOU ARE BUYING A HOUSE OR A SHARE As humans we are a mess of contradictory cognitive biases that often cause us to make poor decisions, even as we think we're evaluating the available data with a clear head.
Recency bias is perhaps the worst of the many cognitive biases. Simply put, it means we give recent events far more importance than they actually deserve, while ignoring or downplaying older, as well as future, data points. One recent example was in 2021, when the local prime rate was at multidecade lows. This resulted in many people buying houses, because the low rates meant they could afford to do so. The problem is that a quick glance at the longer trend of local interest rates would have shown that the extremely low rates were not likely to last
RECENCY BIAS, WHERE THE EVENTS OF RIGHT NOW CLOUD OUR MEMORY OF THE MORE DISTANT PAST AND THOUGHTS OF THE FUTURE, IS A DANGEROUS FACTOR IN DECISION-MAKING, WHETHER YOU ARE BUYING A HOUSE OR A SHARE As humans we are a mess of contradictory cognitive biases that often cause us to make poor decisions, even as we think we're evaluating the available data with a clear head.
Recency bias is perhaps the worst of the many cognitive biases. Simply put, it means we give recent events far more importance than they actually deserve, while ignoring or downplaying older, as well as future, data points. One recent example was in 2021, when the local prime rate was at multidecade lows. This resulted in many people buying houses, because the low rates meant they could afford to do so. The problem is that a quick glance at the longer trend of local interest rates would have shown that the extremely low rates were not likely to last
