◐ Behavioral
◆ The PatternWeighting recent events more heavily than historical ones.
Recency bias — weighting recent events disproportionately when forming expectations.
Mechanism:
• Bull market for 5 years → "stocks always go up" (extrapolation)
• Crash last month → "the market is too dangerous" (fear persistence)
• Recent quarter's earnings → overshadows decade of data
• Bull market for 5 years → "stocks always go up" (extrapolation)
• Crash last month → "the market is too dangerous" (fear persistence)
• Recent quarter's earnings → overshadows decade of data
Historical base rates are more reliable than recent anecdotes. The recent past feels like the permanent future — it isn't.
Pattern bridge: Overweighting recent events is the human version of exponential moving averages. In ML, cross-validation exists specifically to prevent this — don’t just test on the latest fold.