The availability heuristic is a term coined by academics Daniel Kahneman and Amos Tversky who observed that people tend to rely on readily available recent knowledge rather than exploring other probabilities when making decisions. The "cognitive illusion" this creates causes havoc for investors. It means we repeatedly fail to anticipate financial disasters – such as the dotcom collapse of 2000 or the US housing market – because at the time they were unfamiliar events. It also means that once the threat of this kind of event is fresh in peoples' minds that people exaggerate its likelihood.
In May 2012, hedge fund manager Hugh Hendry writing for the FT, wondered if the availability heuristic would result in many more years of policy making and trading driven by the threat of debt and deflation. In February 2013 an FT writer wondered if the availability heuristic was clouding views on the likely direction of bond yields.