Searching for Gambles: Gambling Sentiment and Stock Market Outcomes

55 Pages Posted: 25 Jul 2015 Last revised: 13 Dec 2018

See all articles by Yao Chen

Yao Chen

Cardiff University - Cardiff Business School

Alok Kumar

University of Miami - School of Business Administration

Chendi Zhang

University of Warwick - Finance Group

Date Written: December 10, 2018

Abstract

Using Internet search volume for lottery-related keywords to capture gambling sentiment shifts, we show that when the overall gambling sentiment is high, investor demand for lottery-like stocks increases, stocks with lottery-like characteristics earn positive abnormal returns in the short-run, managers are more likely to announce stock splits to cater to the increased demand for low-priced lottery stocks, and IPOs perceived as lotteries earn higher first-day returns. Further, the sentiment-return relation is stronger among low institutional-ownership firms and in regions where gambling is more acceptable. These results support the view that gambling sentiment has a spillover effect on the stock market.

Keywords: Gambling sentiment; lottery-type stocks; investor attention; catering; stock splits; IPO first-day return

JEL Classification: G11; G12; G14

Suggested Citation

Chen, Yao and Kumar, Alok and Zhang, Chendi, Searching for Gambles: Gambling Sentiment and Stock Market Outcomes (December 10, 2018). Available at SSRN: https://ssrn.com/abstract=2635572 or http://dx.doi.org/10.2139/ssrn.2635572

Yao Chen

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Alok Kumar (Contact Author)

University of Miami - School of Business Administration ( email )

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

HOME PAGE: http://moya.bus.miami.edu/~akumar

Chendi Zhang

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

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