House money effect refers to the premise that people are more willing to take risks with money they obtained easily or unexpectedly.
Investors who have experienced a gain or profit are often willing to take more risk. Gamblers call this “playing with the house’s money.” Since they don’t yet consider the money to be their own, they are willing to take more risk with it.
The house money effect predicts investors will be more likely to purchase risky stocks after closing out a profitable trade. Behavioral finance theory suggests that overcoming this bias may help investors profit more over the long term.