We use a new and unique dataset to investigate the way investors react to prior gains/losses and the so called ”familiarity” bias. We distinguish between di¤erent behavioral theories (loss aversion, house-money e¤ect, mental accounting) and between behavioral and rational hypotheses (pure familiarity and informationbased familiarity). We show that, on an yearly horizon, investors react to previ...

The phenomenon that prior gains may increase people’s willingness to accept risky gambles is named as the house money effect (Thaler and Johnson, 1990). Many studies have shown that the “house money effect” is a robust phenomenon but few scholars explain the mechanism of it well. We suppose the reason for the house money effect is that the ante (starting amount) is from the prior gambling profi...

We investigate the way investors react to prior gains/losses. We use a new and unique dataset with detailed information on investors’ various components of wealth, income, demographic characteristics and portfolio holdings identified at the stock level. We test the theory of loss aversion against the alternative provided by standard utility theory and the house-money effect. We show that, on a ...

The house‐money effect –people's tendency to be more daring with easily‐gotten money– is a behavioral pattern that poses questions about the external validity of experiments in economics: to what extent do people behave in experiments like they would have in a real‐life situation, given that they play with easily‐gotten house money? We ran an economic experiment with 66 students to measure the ...

this article investigates fluctuations in stocks prices at tehran stock exchange, assuming that investors' utility stems from fluctuations in value of stocks as well as consumption. thus, the two behavioral phenomena discussed in prospect theory, i. e. loss aversion and house money effect, were factored into consumption-based asset pricing model and investor's utility function, which ...