The House Money Effect in Individual Investors; Evidence from Tehran Stock Exchange

This paper investigates the existence of the house money effect among individual investors by using the intraday transactions dataset in Iran Stock Market. Regarding the purpose of investigation the relation between the investment gains and the change in risk taking، Firstly، we calculate the profit profile of investors in each day. Then، the risk taking of every investor are calculated by using the portfolio weighted average volatility of portfolio’s components. At the end، with the calculation of the change in average component volatility between the two given period، the data can be used in regression analysis. This study indicates that more than 87% of experiences in investment gains can lead to the increase in the level of risk taking in the further investment decisions. As a result، we can see the evidence of the effect of the house money in Tehran Stock Exchange.