Theory and Decision

, Volume 68, Issue 4, pp 445–462 | Cite as

The hot hand belief and the gambler’s fallacy in investment decisions under risk

  • Jürgen Huber
  • Michael KirchlerEmail author
  • Thomas Stöckl


We conduct experiments to analyze investment behavior in decisions under risk. Subjects can bet on the outcomes of a series of coin tosses themselves, rely on randomized ‘experts’, or choose a risk-free alternative. We observe that subjects who rely on the randomized experts pick those who were successful in the past, showing behavior consistent with the hot hand belief. Obviously the term ‘expert’ suffices to attract some subjects. For those who decide on their own, we find behavior consistent with the gambler’s fallacy, as the frequency of betting on heads (tails) decreases after streaks of heads (tails).


Hot hand belief Gambler’s fallacy Experimental economics Decision making under risk 

JEL Classification

C91 D81 G10 


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Copyright information

© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  • Jürgen Huber
    • 1
  • Michael Kirchler
    • 1
    Email author
  • Thomas Stöckl
    • 1
  1. 1.Department of Banking and FinanceUniversity of InnsbruckInnsbruckAustria

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