The paper develops a model to examine the relationship between the gambler's fallacy and the hot-hand fallacy, and explores their broader implications for economic and financial decisions. The gambler's fallacy is the mistaken belief that random sequences should exhibit systematic reversals, while the hot-hand fallacy involves the belief that random sequences will exhibit excessive persistence. The model assumes that an individual observes a sequence of signals that depend on an unobservable underlying state. The individual's belief in the gambler's fallacy leads them to exaggerate the magnitude of changes in the state but underestimate their duration. When the state is constant, the individual can predict that long streaks of similar signals will continue, leading to the hot-hand fallacy. When signals are serially correlated, the individual typically under-reacts to short streaks, over-reacts to longer ones, and under-reacts to very long ones. The paper explores applications such as investor behavior, including the movement of assets in and out of mutual funds and the willingness to pay for financial information. The results suggest that investors may move assets too much in and out of mutual funds and exaggerate the value of financial information and expertise.The paper develops a model to examine the relationship between the gambler's fallacy and the hot-hand fallacy, and explores their broader implications for economic and financial decisions. The gambler's fallacy is the mistaken belief that random sequences should exhibit systematic reversals, while the hot-hand fallacy involves the belief that random sequences will exhibit excessive persistence. The model assumes that an individual observes a sequence of signals that depend on an unobservable underlying state. The individual's belief in the gambler's fallacy leads them to exaggerate the magnitude of changes in the state but underestimate their duration. When the state is constant, the individual can predict that long streaks of similar signals will continue, leading to the hot-hand fallacy. When signals are serially correlated, the individual typically under-reacts to short streaks, over-reacts to longer ones, and under-reacts to very long ones. The paper explores applications such as investor behavior, including the movement of assets in and out of mutual funds and the willingness to pay for financial information. The results suggest that investors may move assets too much in and out of mutual funds and exaggerate the value of financial information and expertise.