Which Proxy: Capturing Lottery Preference through Aggregation

91 Pages Posted: 4 Jun 2020 Last revised: 9 Feb 2024

See all articles by Lei Jiang

Lei Jiang

Kent State University

Quan Wen

McDonough School of Business, Georgetown University

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School

Yifeng Zhu

School of Finance, Central University of Finance and Economics

Date Written: December 10, 2023

Abstract

We develop a lottery factor from 13 commonly utilized lottery measures and find this factor substantially enhances the well-known factor models concerning market anomalies, particularly those related to skewness and value. Our findings emphasize that stocks exhibiting high lottery characteristics display considerable anomaly returns, primarily due to the short position of these stocks rather than their financial distress. Moreover, our research consistently indicates that lottery stocks frequently correlate with low short volume and higher shorting fees. This implies that the preference of retail investors to hold onto lottery stocks results in a reduced supply of these shares available for lending.

Keywords: Lottery preference factor, anomalies, partial least square (PLS)

JEL Classification: G11, G12

Suggested Citation

Jiang, Lei and Wen, Quan and Zhou, Guofu and Zhu, Yifeng, Which Proxy: Capturing Lottery Preference through Aggregation (December 10, 2023). Available at SSRN: https://ssrn.com/abstract=3595419 or http://dx.doi.org/10.2139/ssrn.3595419

Lei Jiang

Kent State University ( email )

7584 ROYAL PORTRUSH DR
SOLON, OH 44139
United States
14707312170 (Phone)

Quan Wen

McDonough School of Business, Georgetown University ( email )

37th and O Street, NW
Washington D.C., DC 20057
United States

HOME PAGE: http://quan-wen.facultysite.georgetown.edu/home

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

Yifeng Zhu

School of Finance, Central University of Finance and Economics ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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