Searching for Gambles: Gambling Sentiment and Stock Market Outcomes

61 Pages Posted: 25 Jul 2015 Last revised: 1 May 2020

See all articles by Yao Chen

Yao Chen

University of Exeter Business School

Alok Kumar

University of Miami - Miami Herbert Business School

Chendi Zhang

University of Exeter Business School

Date Written: February 12, 2020

Abstract

Using Internet search volume for lottery to capture gambling sentiment shifts, we show that when the overall gambling sentiment is high, investor demand for lottery-like stocks increases, these stocks earn positive short-run abnormal returns, 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, headquartered in regions where gambling is more acceptable and local bias is stronger. 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 (February 12, 2020). Available at SSRN: https://ssrn.com/abstract=2635572 or http://dx.doi.org/10.2139/ssrn.2635572

Yao Chen

University of Exeter Business School ( email )

Streatham Court
Exeter, EX4 4PU
United Kingdom

Alok Kumar (Contact Author)

University of Miami - Miami Herbert Business School ( 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 Exeter Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

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