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#9 - Recency Bias: Exploring and Refuting Common Investor Behavioral Biases

Does recent history make a difference in financial investment? Stock market prognosticators carry a track record of projecting ongoing investment trends based solely on most recent stock activity. A rising stock in recent weeks is expected to continue its upward trajectory into the future since there seems to be no indication otherwise. This can be a dangerous assumption, one which investors refer to as Recency Bias.

Investor Behaviors

#8 - Preferring Stories over Data: Exploring and Refuting Common Investor Behavioral Biases

Each of us craves a good story. Imagine you’re at a dinner party and your friend shares this story, “I invested $72,591 in a stock that tripled in value within a week. I sold the stock yesterday and it’s paying for all three of our kids to attend college.” It’s an inspiring story and it may even be enough for you to go out and invest tens of thousands of dollars in a single stock option in search of that same windfall. This investor behavioral bias is simply called “Preferring Stories over Data”.

Investor Behaviors