Monthly Cyclicality in Retail Investors' Liquidity and Lottery-Type Stocks at the Turn of the Month
48 Pages Posted: 11 Aug 2016
Date Written: August 9, 2016
Abstract
The well-documented under performance of lottery stocks masks a within-month cyclical pattern. Demand for lottery stocks increases at the turn of the month especially in areas whose demographic profile resembles that of the typical lottery-ticket buyers (i.e., gamblers) driving their prices higher at the turn of the month. This effect is particularly pronounced among firms located in areas whose demographic profile resembles that of the typical lottery-ticket buyer and propelled by the within-month cyclicality of local investors’ personal liquidity positions. A long-short investment strategy based on this cyclical pattern of lottery stocks performance yields gross abnormal returns of about 15% per year.
Keywords: Lottery-Type Stocks, Turn-Of-The-Month Effect, Gambling
JEL Classification: G14
Suggested Citation: Suggested Citation