Recency Bias is a cognitive heuristic where individuals disproportionately weigh recent events or information more heavily than older data when making decisions or forming judgments. This psychological tendency impacts investment choices and market analysis.
Mechanism
In crypto markets, this bias manifests when investors react primarily to the most recent price movements, news, or narratives, often extrapolating short-term trends into long-term expectations. This mechanism can lead to herd behavior, causing market participants to overlook historical patterns or fundamental shifts in favor of immediate data points.
Methodology
The strategic mitigation of recency bias involves implementing systematic, data-driven analytical frameworks and adhering to predefined investment rules. Methodologies include rigorous backtesting, utilizing long-term historical data series, and diversifying information sources to ensure decisions are based on comprehensive market context rather than transient, recent performance.
Cognitive biases in RFP evaluation are systemic vulnerabilities in the decision-making process that can be mitigated through a structured, data-driven operational framework.
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