Maria has been investing in the stock market for five years. Her most recent two years have been exceptionally profitable, experiencing 20% and 25% returns, respectively. Based on these recent successes, she now believes that the market will continue to yield similar high returns indefinitely and plans her future retirement savings based on an assumed 20% annual return. What behavioural bias is Maria exhibiting?

Question: Maria has been investing in the stock market for five years. Her most recent two years have been exceptionally profitable, experiencing 20% and 25% returns, respectively. Based on these recent successes, she now believes that the market will continue to yield similar high returns indefinitely and plans her future retirement savings based on an assumed 20% annual return. What behavioural bias is Maria exhibiting?

Answer options: ✅ Recency Bias

• Anchoring
• Loss Aversion
• Confirmation Bias

Correct answer: Recency Bias

Explanation: Recency bias is the tendency to overweight recent events or experiences when making predictions or judgments about the future. Maria is assuming that recent exceptional returns will continue, despite historical market volatility and long-term averages being much lower.