Recent events are weighted more heavily than earlier events.
The everyday form is judging a whole year by December, or a manager by the last quarter. In finance it produces the standard error of extrapolating recent returns, which is why disclaimers about past performance exist.
In practice
- A fund's three-year record is read as skill and the ten-year record as history.
- A manager who had a strong final month is rated well above one who was consistent and finished quietly.
- Further reading
- Wikipedia
- Subject
- Psychology & Behavior
- Essay
- A century and a half of measuring the mind