How Do Prior Gains and Losses Affect Subsequent Risk Taking? New Evidence from Individual-Level Horse Race Bets

Published Online:https://doi.org/10.1287/mnsc.2016.2679

References

  • Ackert LF, Charupat N, Church BK, Deaves R (2006) An experimental examination of the house money effect in a multi-period setting. Experiment. Econom. 9(1):5–16.CrossrefGoogle Scholar
  • Ali MM (1977) Probability and utility estimates for racetrack bettors. J. Political Econom. 85(4):803–815.CrossrefGoogle Scholar
  • Asch P, Malkiel BG, Quandt RE (1982) Racetrack betting and informed behavior. J. Financial. Econom. 10(2):187–194.CrossrefGoogle Scholar
  • Barberis N, Xiong W (2009) What drives the disposition effect? An analysis of a long-standing preference-based explanation. J. Finance 64(2):751–784.CrossrefGoogle Scholar
  • Barkan R, Busemeyer JR (1999) Changing plans: Dynamic inconsistency and the effect of experience on the reference point. Psych. Bull. Rev. 6(4):547–554.CrossrefGoogle Scholar
  • Brown P, Chappel N, Da Silva Rosa R, Walter T (2006) The reach of the disposition effect: A large sample evidence across investor classes. Internat. Rev. Finance 6(1–2):43–78.CrossrefGoogle Scholar
  • Camerer C (2000) Prospect theory in the wild: Evidence from the field. Kahneman D, Tversky A, eds. Choices, Values, and Frames (Cambridge University Press, Cambridge, UK), 288–300.CrossrefGoogle Scholar
  • Choe H, Eom Y (2009) The disposition effect and investment performance in the futures market. J. Futures Markets 29(6):496–522.CrossrefGoogle Scholar
  • Corgnet B, Hernán-González R, Kujal P, Porter D (2015) The effect of earned versus house money on price bubble formation in experimental asset markets. Rev. Finance 19(4):1455–1488.CrossrefGoogle Scholar
  • Coval JD, Shumway T (2005) Do behavioral biases affect prices? J. Finance 60(1):1–34.CrossrefGoogle Scholar
  • Dhar R, Zhu N (2006) Up close and personal: Investor sophistication and the disposition effect. Management Sci. 52(5):726–740.LinkGoogle Scholar
  • Frino A, Grant J, Johnstone D (2008) The house money effect and local traders on the Sydney Futures Exchange. Pacific-Basin Finance J. 16(1–2):8–25.CrossrefGoogle Scholar
  • Garvey R, Murphy A, Wu W (2007) Do losses linger? Evidence from proprietary stock traders. J. Portfolio Management 33(4):75–83.CrossrefGoogle Scholar
  • Genesove D, Mayer C (2001) Loss aversion and seller behavior: Evidence from the housing market. Quart. J. Econom. 116(4):1233–1260.CrossrefGoogle Scholar
  • Gertner R (1993) Game shows and economic behavior: Risk-taking on “Card Sharks.” Quart. J. Econom. 108(2):507–521.CrossrefGoogle Scholar
  • Gneezy U, Kapteyn A, Potters J (2003) Evaluation periods and asset prices in a market experiment. J. Finance 58(2):821–837.CrossrefGoogle Scholar
  • Golec J, Tamarkin M (1998) Bettors love skewness, not risk, at the horse track. J. Political Econom. 106(1):205–225.CrossrefGoogle Scholar
  • Grinblatt M, Keloharju M (2001) What makes investors trade? J. Finance 56(2):589–616.CrossrefGoogle Scholar
  • Hirshleifer D (2001) Investor psychology and asset pricing. J. Finance 56(4):1533–1597.CrossrefGoogle Scholar
  • Hsu Y-L, Chow EH (2013) The house money effect on investment risk taking: Evidence from Taiwan. Pacific-Basin Finance J. 21(1):1102–1115.CrossrefGoogle Scholar
  • Huang YC, Chan SH (2014) The house money and break-even effects for different types of traders: Evidence from Taiwan futures markets. Pacific-Basin Finance. J. 26(1):1–13.CrossrefGoogle Scholar
  • Imas A (2016) The realization effect: Risk-taking after realized versus paper losses. Amer. Econom. Rev. 106(8):2086–2109.CrossrefGoogle Scholar
  • Jullien B, Salanié B (2000) Estimating preferences under risk: The case of racetrack bettors. J. Political Econom. 108(3):503–530.CrossrefGoogle Scholar
  • Kanto A, Rosenqvist G, Suvas A (1992) On utility function estimation of racetrack bettors. J. Econom. Psych. 13(3):491–498.CrossrefGoogle Scholar
  • Keasey K, Moon P (1996) Gambling with the house money in capital expenditure decisions: An experimental analysis. Econom. Lett. 50(1):105–110.CrossrefGoogle Scholar
  • Liu Y-J, Tsai C-L, Wang M-C, Zhu N (2010) Prior consequences and subsequent risk taking: New field evidence from the Taiwan futures exchange. Management Sci. 56(4):606–620.LinkGoogle Scholar
  • Locke PR, Mann SC (2005) Professional trader discipline and trade disposition . J. Financial Econom. 76(2):401–444.CrossrefGoogle Scholar
  • McGlothlin WH (1956) Stability of choices among uncertain alternatives. Amer. J. Psych. 69(4):604–615.CrossrefGoogle Scholar
  • Odean T (1998) Are investors reluctant to realize their losses? J. Finance 53(5):1775–1798.CrossrefGoogle Scholar
  • Sauer R (1998) The economics of wagering markets. J. Econom. Literature 36(4):2021–2064.Google Scholar
  • Shefrin H, Statman M (1985) The disposition to sell winners too early and ride losers too long: Theory and evidence. J. Finance 40(3):777–790.CrossrefGoogle Scholar
  • Smith G, Levere M, Kurtzman R (2009) Poker player behavior after big wins and big losses. Management Sci. 55(9):1547–1555.LinkGoogle Scholar
  • Snowberg E, Wolfers J (2010) Explaining the favorite-long shot bias: Is it risk-love or misperceptions? J. Political Econom. 118(4):723–746.CrossrefGoogle Scholar
  • Thaler RH, Johnson EJ (1990) Gambling with the house money and trying to break even: The effects of prior outcomes on risky choice. Management Sci. 36(6):643–660.LinkGoogle Scholar
  • Thaler RH, Ziemba WT (1988) Anomalies: Parimutuel betting markets: Racetracks and lotteries. J. Econom. Perspect. 2(2):161–174.CrossrefGoogle Scholar
  • Tversky A, Kahneman D (1992) Advances in prospect theory: Cumulative representation of uncertainty. J. Risk Uncertainty 5(4):297–323.CrossrefGoogle Scholar
  • Weber M, Camerer CF (1998) The disposition effect in securities trading: An experimental analysis. J. Econom. Behav. Organ. 33(2):167–184.CrossrefGoogle Scholar
  • Weber M, Zuchel H (2005) How do prior outcomes affect risk attitude? Comparing escalation of commitment and the house-money effect. Decision Anal. 2(1):30–43.LinkGoogle Scholar
  • Zhang W, Semmler W (2009) Prospect theory for the stock markets: Empirical evidence with time-series data. J. Econom. Behav. Organ. 72(3):835–849.CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.