Conditional Demand for Lottery-Type Stocks: Information Spillovers and Asset Prices Comovement

34 Pages Posted: 21 May 2024

See all articles by Yu Zhang

Yu Zhang

University of Reading - ICMA Centre

Ran Tao

Accounting and Finance Department, University of Bristol

Konstantina Kappou

University of Reading - ICMA Centre

Andrew Urquhart

University of Reading - ICMA Centre; ICMA Centre, Henley Business School

Date Written: May 20, 2024

Abstract

Previous literature has shown that investors' demand for lottery-type stocks is conditional on a number of factors, and that these stocks underperform in the long run compared to non-lottery-type stocks. We document that investors’ demand for lottery-type stocks is conditional on days with information spillovers. Specifically, on macroeconomic news days, the demand for lottery-type stocks depends on information content and asset prices more closely follow the market index movements. This comovement tends to persist on FOMC announcement days and for firms without overlapping earnings announcements. We provide an information-based theory to explain the empirical pattern.

Keywords: lottery-type stocks, macroeconomic news, asset prices comovement, information spillovers

JEL Classification: G10, G12, G14

Suggested Citation

Zhang, Yu and Tao, Ran and Kappou, Konstantina and Urquhart, Andrew, Conditional Demand for Lottery-Type Stocks: Information Spillovers and Asset Prices Comovement (May 20, 2024). Available at SSRN: https://ssrn.com/abstract=4834672 or http://dx.doi.org/10.2139/ssrn.4834672

Yu Zhang (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Ran Tao

Accounting and Finance Department, University of Bristol

15-19 Tyndall's Park Rd
Bristol, BT95EE
United Kingdom

Konstantina Kappou

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 7793405682 (Phone)
+44 1189314741 (Fax)

Andrew Urquhart

University of Reading - ICMA Centre ( email )

ICMA Centre, Henley Business School ( email )

University of Reading
Whiteknights
Reading, Berkshire RG6 6BA
United Kingdom

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