Attention, Social Interaction, and Investor Attraction to Lottery Stocks

70 Pages Posted: 15 Mar 2019 Last revised: 10 Dec 2021

See all articles by Turan G. Bali

Turan G. Bali

Georgetown University - McDonough School of Business

David A. Hirshleifer

Marshall School of Business, USC; National Bureau of Economic Research (NBER)

Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Yi Tang

Fordham University - Gabelli School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: February 27, 2019

Abstract

We find that among stocks dominated by retail investors, the lottery anomaly is amplified by high investor attention (proxied by high analyst coverage, salient earnings surprises, or recency of extreme positive returns) and intense social interactions (proxied by Facebook social connectedness or population density near firm headquarters). Such stocks' lottery features attract greater Google search volume and retail net buying, followed by more negative earnings surprises and lower announcement-period returns. The findings provide insight into the roles of attention and social interaction in securities markets, and support the hypothesis that these forces contribute to investor attraction to lottery stocks.

Keywords: lottery stocks, investor attention, social interactions, social network, MAX, skewness, retail investors.

JEL Classification: G10, G11, G12, G14, C13, E20, E30

Suggested Citation

Bali, Turan G. and Hirshleifer, David A. and Peng, Lin and Tang, Yi, Attention, Social Interaction, and Investor Attraction to Lottery Stocks (February 27, 2019). 9th Miami Behavioral Finance Conference 2018, Baruch College Zicklin School of Business Research Paper No. 2019-03-01, Georgetown McDonough School of Business Research Paper No. 3343769, Available at SSRN: https://ssrn.com/abstract=3343769 or http://dx.doi.org/10.2139/ssrn.3343769

Turan G. Bali (Contact Author)

Georgetown University - McDonough School of Business ( email )

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David A. Hirshleifer

Marshall School of Business, USC ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

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Lin Peng

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States

Yi Tang

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

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