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. Market Psychology

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

    The emotional aspects associated with investing and the negative ...
  5. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
  6. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
Related Articles
  1. Investing Basics

    Tips For Avoiding Excessive Trading

    Learn to trade smart instead of gambling with your money.
  2. Retirement

    This Is Your Brain On Stocks

    Find out how the human mind can hurt investors' portfolios.
  3. Investing Basics

    Removing The Barriers To Successful Investing

    Learn how to stop using emotion and bad habits to make your stock picks.
  4. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  5. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  6. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.
  7. Chart Advisor

    Why Now is the Time for Food and Beverage Stocks

    As volatility rears its ugly head, it's natural to investigate stable sectors such as food and beverages. Here's an appropriately-named ETF to consider.
  8. Chart Advisor

    4 Big Stock Gainers: Hold or Sell?

    These four stocks saw big moves higher on March 17. Is it time to take profits or hold out for more. Here's what the charts say.
  9. Charts & Patterns

    Why These Could Be 2015's 10-Best Pharma Stocks

    The pharmaceutical stocks covered here have significant potential going forward. Here's why.
  10. Charts & Patterns

    Are These the 10 Best Internet Stocks of 2015?

    These internet companies vary in size, but they all offer future potential.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center