Recency bias is another common type of cognitive bias in which people’s decisions are influenced by what happened in recent times. An example is the bull and bear runs of the stock market. When the market is having a good time, people assume that it will continue and increase their investments, attracting even more into the bubble. On the other hand, when the market crashes, the trend reverses as more people want to sell, expecting the doom to continue. A lot of analysts, unaware of the bias, carry this fallacy and use the term momentum, a term borrowed from physics, to describe this phenomenon.
Another example is the mass cancellations after aircraft crashes. A recent news report says the cancellation, of close to 9000 flights, following the incident of a China Eastern Airlines flight in March this year. Interestingly this was the first fatal airliner incident in China in the last 12 years!
