Cognitive Errors in Investment Decisions

During a recent investment committee meeting, the portfolio manager presented performance data suggesting that a particular technology stock, XYZ Corp, had outperformed the market by significant margins over the past three years. Despite peddling the promising future of the tech sector, some committee members displayed an unusual overconfidence in their projections for XYZ's future performance. However, another committee member pointed out that the stock's recent performance might lead to a cognitive bias known as the recency effect, where individuals weigh recent events more heavily than earlier data. Your task is to analyze the cognitive errors at play in this investment scenario.