how does an investor act as a result of this behavioral effect?
Taking unwarrented bets to break even, since he has nothing to lose.
Gamblers fallacy is when you think something is “due”. IE flipping a coin and you get 10 heads in a row you think its more likely that a tail is due even though its still 50/50. Market down 10 years in a row its “due” to go higher.
Crazily betting on mean reversion…