Newsflash for Investors and Gamblers: Winning Causes Losing

Two new experiments show that winning caused gamblers to bet recklessly.

Posted Sep 27, 2010

No one would ever give such advice to a budding investor. And yet financial advisors have known for years that individual investors tend to buy stocks that have recently risen in price and sell them once they've dropped [1]. Apparently this is because people expect trends to continue. If particular stocks have been rising steadily over past months, people think that rise will continue and therefore buy them at a high price. If their own stocks have been falling in price, they fear that the stocks will drop to nothing and therefore unload them at a low price.

My research assistants, Lori Cummins and Michael Nadorff, and I thought it would be interesting to see if winning a lot could actually cause a person to make very poor or risky bets in a card game. We reasoned that like individual investors who expect stocks that have recently in price to continue to gain in value, people who had just won many bets would wager too much on hands that were likely to lose.

We ran two card playing experiments in my psychology laboratory at the University of Notre Dame. In both experiments with a total of 179 players, we set up a tournament on the computer for real prize money. The game was Acey-Deucey (or Between the Sheets). Players started with a stack of chips on the computer screen. They placed bets with these chips on whether the next card that they would be dealt would fall between the two cards. For example, if they had a Queen and a deuce, any card in the deck would be a win except for a King, Queen, deuce, or Ace.

The catch was that in both experiments, we rigged the first tournament. Half the players (chosen at random) won 80% of the hands they played, and half the players lost 80% of the hands they played.

So the question at that point was, "How well would the players who had just won, as compared with those who had just lost, play in a new tournament that was not rigged?"

After the first tournament was over, all the players were given a second chance to win with a fresh stack of chips. They were told that their first tournament had no bearing on whether they would win the prize money. This time we did not rig the tournament -- the cards were dealt randomly. We then assessed which players bet too recklessly or bet too many chips on hands that were likely to lose.

It turns out that the players who were in the condition in which they had won 80% of their hands, as compared to those who had just lost 80% of their hands, ended up betting significantly more poorly and recklessly. We got the same results across both experiments.

In the second experiment, we also included a measure of their positive and negative emotions after the first tournament. It turns out that feeling good after the first tournament was associated with betting more recklessly in the second tournament.

In a nutshell, the findings from both experiments demonstrated that winning can actually cause people to bet recklessly and poorly. So if you've ever heard people say, "The worst thing that can happen to a new gambler is to win big", they may be right. That big winner feels good and therefore is likely to lose.

It's funny because the most successful poker player I know told me years ago that he thinks he's going to lose every time he walks into the casino. Gambling is one is situation where the power of negative thinking may be just the ticket.


1. Dalbar, Inc. (2003). Market chasing mutual fund investors earn less than inflation. Available:

2. Cummins, L. F., Nadorff, M. N., & Kelly, A. E. (2009). Winning and positive affect can lead to reckless gambling. Psychology of Addictive Behaviors, 23, 287-294.

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