Opening day is a glorious time for baseball fans. Warmer temperatures and blooming shrubbery are on their way, and more importantly, their favorite teams will begin a stretch of 162 games that culminates with a best-of-seven battle between the American and National League champions.

With leaves falling and colder temperatures upon us, most baseball fans are left out in the cold. However, here in Washington D.C., and no doubt in Houston, everyone is a diehard fan cheering their team on to a World Series crown.

Curly W’s, the logo of the Washington Nationals (Nats) baseball team, litter the streets, schools, and even office buildings of D.C. Everyone is on board the Nationals train, yet in August you could have spent a paltry $20 for a decent seat and shown up to a half-empty stadium to see the same Nationals play. Today, standing room only tickets for the World Series are said to be fetching $1000.

As the Nationals and Astros begin the World Series, the baseball gods are teaching us a valuable lesson that applies to investing as much as it does sports.

Bandwagon Bias

Within the last month or so, the Nationals and Astros have attracted a huge following of “bandwagon” fans. People who were casual fans or not even fans at all are gripped by a desire and the camaraderie of being with a winner.

Trina Ulrich, a friend of ours and sports psychology professor at American University, was recently interviewed by radio station WAMU to talk about the psychology behind bandwagon fans. The interview and article can be found HERE. Stay tuned as The Lance Roberts Podcast will be interviewing Trina in November.

Trina Ulrich defines the bandwagon effect as follows: “[It’s] essentially a psychological phenomenon that happens when people are doing something because others are doing it already.” Sound familiar?

We have written many articles describing and warning about the dangers of market bandwagons, in particular, investor conformity and the so-called herding effect. These biases are widespread in today’s market place and are extremely important to grasp….CLICK for complete article