Gambling and Comovement

49 Pages Posted: 18 Dec 2010 Last revised: 19 Oct 2013

See all articles by Alok Kumar

Alok Kumar

University of Miami - Miami Herbert Business School

Jeremy K. Page

Brigham Young University

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

Date Written: October 18, 2013

Abstract

This study shows that correlated trading by gambling-motivated investors generates excess return comovement among stocks with lottery features. Lottery-like stocks comove strongly with one another and this return comovement is strongest among lottery stocks located in regions where investors have a greater propensity to gamble. The relation between local gambling preferences and lottery stock comovement is amplified when local lottery ticket sales are high, and when local investors experience positive income shocks. Looking directly at investor trades, we find that investors with a greater propensity to gamble trade lottery-like stocks more actively and that those trades are more strongly correlated.

Suggested Citation

Kumar, Alok and Page, Jeremy K. and Spalt, Oliver G., Gambling and Comovement (October 18, 2013). Available at SSRN: https://ssrn.com/abstract=1727012 or http://dx.doi.org/10.2139/ssrn.1727012

Alok Kumar (Contact Author)

University of Miami - Miami Herbert Business School ( email )

517B Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://sites.google.com/view/alokmiami/home

Jeremy K. Page

Brigham Young University ( email )

Marriott School of Management
685 TNRB
Provo, UT 84602
United States
801-422-7173 (Phone)

HOME PAGE: http://marriottschool.byu.edu/directory/details?id=19364

Oliver G. Spalt

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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