Friday, February 21, 2020

Primacy and recency effects - The ordering of ideas matters

If I give you a list of five important investment ideas, you will likely remember the first and the last, and forget the ideas in the middle. Exploiting the primacy and recency effect is used with almost all marketing and screen development. What we look at first and last matters.  

This knowledge can be used with investment decision-making especially given there is so much data to review in any given day. This seems obvious, but the critical issue is to ensure recall. The development of investment dashboards has grown as managers have tried to condense information on a screen. The primacy effect says to focus on what is most important to the top of the dashboard. Similarly, recency tells us to also place important information at the end of a report. 

Similarly, all marketing and research material should exploit these recall effects. What is said in the middle does not matter because the audience will not remember your point. Obviously, we have always had a bias to quantitative modeling because there will be no primacy and recency effects, but at some point even output will have to be reviewed, so ordering output will matter.  

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