Searching for Gambles: Gambling Sentiment and Stock Market Outcomes
61 Pages Posted: 25 Jul 2015 Last revised: 1 May 2020
Date Written: February 12, 2020
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: Suggested Citation