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An experimental examination of the house money effect in a multi-period setting Author info | Abstract | Publisher info | Download info | Related research | Statistics Lucy F. Ackert
Narat Charupat
Bryan K. Church
James Tompkins
Richard Deaves
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There is evidence that risk-taking behavior is influenced by prior monetary gains and losses. When endowed with house money, people become more risk taking. This paper is the first to report a house money effect in a dynamic, financial setting. Using an experimental method, the authors compare market outcomes across sessions that differ in the level of cash endowment (low and high). Their experimental results provide strong support for a house money effect. Traders' bids, price predictions, and market prices are influenced by the amount of money that is provided prior to trading. However, dynamic behavior is difficult to interpret due to conflicting influences.
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Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number
2003-13.
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Date of creation: 2003Date of revision:
Handle: RePEc:fip:fedawp:2003-13Contact details of provider: Postal: 1000 Peachtree St., N.E., Atlanta, Georgia 30309 Phone: 404-521-8500 Email: Web page: http://www.frbatlanta.org/ More information through EDIRC
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Keywords: Financial markets ; Investments ; Risk ; Other versions of this item:
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Lucy F. Ackert & Narat Charupat & Richard Deaves & Brian D. Kluger, 2006.
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Gerlinde Fellner, 2004.
"Illusion of control as a source of poor diversification: An experimental approach ,"
Papers on Strategic Interaction
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