# Recency Bias

*Behavioral Finance — Finicade finance glossary*

Recency bias overweights the recent past when forecasting, which is why money flows into funds after they have performed well and leaves after crashes.

Recency bias overweights the recent past when forecasting the future, producing the industry's most reliable pattern: money flows into funds and asset classes after they have performed well and leaves after they have performed badly. It is the mechanism behind the gap between fund returns and investor returns, and the reason automated contributions outperform discretionary ones.

**Also known as:** recency effect, extrapolation bias

**Related terms:** [Availability Heuristic](https://finicade.com/glossary/availability-heuristic), [Behavioral Gap](https://finicade.com/glossary/behavioral-gap), [Market Timing](https://finicade.com/glossary/market-timing), [Momentum Factor](https://finicade.com/glossary/momentum-factor), [Behavioral Biases](https://finicade.com/glossary/behavioral-biases)

Source: https://finicade.com/glossary/recency-bias