Gambling in the Stock Market: The Motivations behind Excessive and Speculative Trading

37 Pages Posted: 16 Aug 2017 Last revised: 22 Feb 2018

Ruben Cox

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); The Netherlands Authority for the Financial Markets (AFM)

Atcha Kamolsareeratana

Mahidol University, College of Management, Students

Roy Kouwenberg

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Mahidol University - College of Management

Date Written: February 15, 2018

Abstract

Active stock trading by individual investors is hard to explain, as investors who trade more actively tend to perform worse. We investigate to what extent gambling motives can explain excessive and speculative trading. We use five different proxies for gambling motives, ranging from fairly innocent, such as aspiring a small chance to become rich, to quite severe, namely compulsive gambling. We find that especially compulsive gambling can explain frequent trading by individual investors well, in addition to indicators for recreational gambling (e.g., in casinos). Further, investors driven by gambling motives tend to be in a significantly worse financial situation.

Keywords: Individual investors, Trading behavior, Gambling

JEL Classification: G11, G02, L83

Suggested Citation

Cox, Ruben and Kamolsareeratana, Atcha and Kouwenberg, Roy, Gambling in the Stock Market: The Motivations behind Excessive and Speculative Trading (February 15, 2018). Available at SSRN: https://ssrn.com/abstract=3018540 or http://dx.doi.org/10.2139/ssrn.3018540

Ruben Cox

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands
+31 (0) 10 4088929 (Phone)

The Netherlands Authority for the Financial Markets (AFM) ( email )

Vijzelgracht 50
Amsterdam, 1017
Netherlands

Atcha Kamolsareeratana (Contact Author)

Mahidol University, College of Management, Students ( email )

Salaya
Thailand

Roy R. P. Kouwenberg

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

HOME PAGE: http://people.few.eur.nl/kouwenberg

Mahidol University - College of Management ( email )

69 Vipawadee Rangsit Road
Bangkok, 10400
Thailand

HOME PAGE: http://www.cmmu.mahidol.ac.th/main/faculty/aroy.asp

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