This narrative review integrates evidence on how anchoring and recency biases influence trading by integrating foundational heuristics research, resource-rational accounts, neurocognitive findings, empirical market studies, and practical debiasing strategies. At the cognitive level, anchoring arises from representativeness, availability, and adjustment heuristics and can reflect a resource-rational under-adjustment when cognitive resources are limited. Neurobiological data implicate right dorsolateral prefrontal cortex in controlled retrieval and adjustment, medial prefrontal cortex in self-based anchoring, and vmPFC–hippocampal circuits in value-weighted episodic consolidation that amplifies recency effects. Market- and firm-level evidence shows that anchored forecasts (for example, analysts referencing industry medians) produce systematic forecast errors and concentrated return patterns around information events, while recency-biased learning at the population level can generate amplified boom–bust price dynamics and help explain observed momentum and long-horizon reversals. Practical interventions span choice architecture and nudges, adviser-facing informational and visual tools, procedural safeguards that slow and structure decision-making, and formal training; experimental neuromodulation provides causal proof of principle but field effectiveness requires further evaluation. Collectively, the reviewed sources portray anchoring and recency as tractable consequences of bounded cognition amenable to layered, evidence-based mitigation.
Shojaei et al. (Wed,) studied this question.