Only Gamble in Town: Stock Market Gambling Around the World and Market Efficiency

56 Pages Posted: 10 Nov 2020 Last revised: 10 Nov 2021

See all articles by Alok Kumar

Alok Kumar

University of Miami - Miami Herbert Business School

Huong Nguyen

Faculty of Finance, University of Economics, The University of Danang, Vietnam

Tālis J. Putniņš

University of Technology Sydney (UTS); Stockholm School of Economics, Riga

Date Written: November 1, 2021

Abstract

Using unique gambling data for 38 countries, we examine whether gambling-motivated trading influences aggregate financial market outcomes. We estimate that there is 3.5 times as much gambling in stock markets as there is in “traditional” gambling outlets such as casinos and lotteries. Gambling accounts for about 14% of stock market volume in developed countries and 33% in emerging retail-dominated markets. Both forms of gambling have common drivers, including wealth, region, and economic environment. Restrictions on traditional gambling generate spillovers into stock markets. Exploiting casino regulation as an instrument, we find that stock market gambling increases liquidity and consequently improves the informational efficiency of prices.

Keywords: stock market gambling, casino, state lottery, liquidity, informational efficiency

JEL Classification: G11, G12, G14

Suggested Citation

Kumar, Alok and Nguyen, Huong and Putnins, Talis J., Only Gamble in Town: Stock Market Gambling Around the World and Market Efficiency (November 1, 2021). Available at SSRN: https://ssrn.com/abstract=3686393 or http://dx.doi.org/10.2139/ssrn.3686393

Alok Kumar

University of Miami - Miami Herbert Business School ( email )

517B Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Huong Nguyen

Faculty of Finance, University of Economics, The University of Danang, Vietnam ( email )

71 Ngu Hanh Son Street
Danang
Vietnam

Talis J. Putnins (Contact Author)

University of Technology Sydney (UTS) ( email )

PO Box 123
Broadway
Sydney
Australia
+61 2 9514 3088 (Phone)

Stockholm School of Economics, Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia
+371 67015841 (Phone)

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