EncyclopediaEncyclopedia › Trading psychology ›
Recency bias and extrapolation
In one line: Expecting the recent past to keep going.
Evidence
Greenwood and Shleifer (2014): investors' return expectations are extrapolative, high after high past returns, even though actual subsequent returns tend to be lower.
Greenwood and Shleifer (2014): investors' return expectations are extrapolative, high after high past returns, even though actual subsequent returns tend to be lower.
Related: the gambler's fallacyThinking a win is "due" after a string of losses., where people expect a short run to 'balance out' (Tversky and Kahneman 1971). Both are about reading too much into small samples, see Sample size.
Related
Sources & studies
Last checked: 2026-11-04 · Educational, not financial advice.
Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.