Recency bias refers to a psychological bias whereby people believe that recent past trends and patterns will continue in the future

How would recency bias explain why investors chase returns? Does return-chasing lead investors to realize a higher rate of return on investments?

Return-chasing involves investing in assets that have realized a high rate of return in the past. Recency bias could explain return-chasing. Recency bias leads people to mistakenly believe that recent past trends and patterns will continue into the future, leading people to chase recent historical returns. As discussed in the Evidence-Based Economics feature in the chapter, research has shown that return-chasing does not usually benefit investors. At 154 of the largest U.S. corporations, employees did not benefit from return chasing.
A-head: EVIDENCE-BASED ECONOMICS: DO INVESTORS CHASE HISTORICAL RETURNS?
Concept: Return chasing