Property crime and lottery-related anomalies

Ya Gao and Reza Bradrania

Global Finance Journal, 2024, vol. 59, issue C

Abstract: In this paper, we explore the association between property crime rate and lottery demand anomalies. Motivated by criminology literature that suggests a positive relation between crime and risk-taking, we conjecture that gambling propensity in the stock market is stronger (weaker) in regions with higher (lower) property crime rate. Consistent with our conjecture, we show that underperformance of lottery stocks, proxied by MAX, is more pronounced in the US regions with higher property crime rates compared to regions with lower property crime rates. Our results are robust to alternative proxies for lottery demand, such as alternative constructions of MAX and skewness measures, and various empirical tests. Our findings suggest variation in crime-induced gambling propensity affects financial market outcomes.

Keywords: MAX; Lottery-related anomalies; Crime; Property crime; Skewness; Expected returns (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G41 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:59:y:2024:i:c:s1044028323001229

DOI: 10.1016/j.gfj.2023.100927

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