Momentum Bias: Transcend The Trend

Date Added: Jul 2009
Format: HTML

Humans have an almost innate tendency to identify recent trends and subconsciously project them into the future. Whether playing sports, investing in the markets, or picking someone up at a bar, we oftentimes cannot help but feel we have a 'hot hand', or, conversely, believe that we have lost our touch and that the world is against us. The key risk here is momentum bias: becoming overconfident or selling ourselves short based on recent trends.