Maybe once you found yourself thinking that investing in some company is a good decision because of its formidable reputation instead of learning about the company’s products and the whole market from its perspective. If so, congrats, the halo effect happened to you.
The halo effect is a cognitive bias that causes favoritism towards a person, thing, or process based on a specific characteristic distinguished by us. The halo effect is a stereotypical mindset when we consider one aspect as fundamental, which becomes a determining factor creating the whole perception.
This article maps out the core of the halo effect and how it affects business and trading. Especially for our readers, we’ve prepared informative examples of the halo effect, why it could be dangerous and how to overcome it.