Investopedia

Continue to Site »

House Money Effect

Filed Under »
Dictionary Says

Definition of 'House Money Effect'

The tendency for investors to take more and greater risks when investing with profits. The house money effect gets its name from the casino phrase "playing with the house's money." The house money effect was first described by Richard H. Thaler and Eric J. Johnson of the Johnson Graduate School of Management of Cornell University.
Investopedia Says

Investopedia explains 'House Money Effect'

The house money effect forecasts that investors are more prone to buy higher-risk stocks after a profitable trade. Some believe that the house money effect is an example of mental accounting, whereby capital is kept separate from recent profits, leading investors to view said profits as disposable. As a result, they are more inclined to take greater risks with the money.

Articles Of Interest

  1.

    Women And Investing: It's A Style Thing

    You don't have to be a boy or act like a boy to win. In fact, doing the opposite could be better for your financial health.

  2. Build A Model Portfolio With Style Investing

    This sophisticated approach will add flair to your returns.

  3. How To Develop A Trading Brain

    The fundamental role of trader psychology tends to be underestimated, with too much emphasis placed on the technical side.

  4. This Is Your Brain On Stocks

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

  5. Tips For Controlling Investment Losses

    A profit/loss plan helps investors recognize mistakes and invest logically, rather than emotionally.

  6. Investors: Rely On Your Gut

    Find out how your personality and natural instincts can direct your investment choices.

  7. Removing The Barriers To Successful Investing

    Learn how to stop using emotion and bad habits to make your stock picks.

  8. Behavioral Finance

    Can psychology-based theories explain stock market anomalies?

  9. Investors Intelligence Sentiment Index

    This indicator can give a overall sense of bull and bear forces - learn what it is and how it's constructed.

  10. Is There An Investing State Of Mind?

    The right investment philosophy can help traders remain profitable during these troubled economic times.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center