Bandwagon Effect

AAA

DEFINITION of 'Bandwagon Effect'

A psychological phenomenon whereby people do something primarily because other people are doing it, regardless of their own beliefs, which they may ignore or override. The bandwagon effect has wide implications, but is commonly seen in politics and consumer behavior. This phenomenon can also be seen during bull markets and the growth of asset bubbles.

This tendency of people to align their beliefs and behaviors with those of a group is also called "herd mentality."

INVESTOPEDIA EXPLAINS 'Bandwagon Effect'

For example, people might buy a new electronic item because of its popularity, regardless of whether they need it, can afford it, or even really want it. In politics, the bandwagon effect might cause citizens to vote for the person who appears to have more popular support because they want to belong to the majority.

RELATED TERMS
  1. Socionomics

    The study of the relationship between social mood and social ...
  2. Behavioral Finance

    A field of finance that proposes psychology-based theories to ...
  3. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
  4. Market Psychology

    The overall sentiment or feeling that the market is experiencing ...
  5. Loss Psychology

    The emotional aspects associated with investing and the negative ...
  6. Absolute Percentage Growth

    An increase in the value of an asset or account expressed in ...
Related Articles
  1. Tips For Avoiding Excessive Trading
    Investing Basics

    Tips For Avoiding Excessive Trading

  2. This Is Your Brain On Stocks
    Retirement

    This Is Your Brain On Stocks

  3. Removing The Barriers To Successful ...
    Investing Basics

    Removing The Barriers To Successful ...

  4. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center