Dissecting the lottery‐like anomaly: Evidence from China

Ming Gu, Yi Hu and Zhitao Xiong

Accounting and Finance, 2025, vol. 65, issue 1, 883-911

Abstract: This paper dissects the lottery‐like anomaly in Chinese A‐share stocks by decomposing total stock returns into overnight and intraday returns. Our findings indicate that negative overnight returns are concentrated among lottery‐like stocks, and the lottery‐like anomaly is primarily driven by the overnight return component. Considering the unique institutional features of China, we further show that the lottery‐like anomaly induced by overnight returns is more pronounced in stocks with a high gambling preference among retail investors and high limits of arbitrage. Overall, our results suggest that investors' optimism and trading constraints have a substantial impact on market efficiency in China.

Date: 2025
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