Recency bias gives "greater importance to the most recent event",[1] such as the final lawyer's closing argument a jury hears before being dismissed to deliberate.
It is not to be confused with recency illusion, the belief or impression that a word or language usage is of recent origin when in reality it is long-established.
Livy, writing in the 1st century BC, described recency bias in his preface to History of Rome: I have very little doubt, too, that for the majority of my readers the earliest times and those immediately succeeding, will possess little attraction; they will hurry on to these modern days in which the might of a long paramount nation is wasting by internal decay.It commonly appears in employee evaluations, as a distortion in favor of recently completed activities or recollections, and can be reinforced or offset by the halo effect.
Recency bias can skew investors into not accurately evaluating economic cycles, causing them to continue to remain invested in a bull market even when they should grow cautious of its potential continuation, and refrain from buying assets in a bear market because they remain pessimistic about its prospects of recovery.
This bias often leads us to make emotionally charged choices—decisions that could erode our earning potential by tempting us to hold a stock for too long or pull out too soon.