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Monthly cyclicality in retail Investors’ liquidity and lottery-type stocks at the turn of the month

Yun Meng and Christos Pantzalis

Journal of Banking & Finance, 2018, vol. 88, issue C, 176-191

Abstract: The well-documented underperformance of lottery stocks masks a within-month cyclical pattern. Demand for lottery stocks increases at the turn of the month, especially in areas whose demographic profile resembles that of typical lottery-ticket buyers (i.e., gamblers), thus driving their prices higher. This effect is rooted in local retail investors’ preference for lottery stocks and propelled by the within-month cyclicality of local investors’ personal liquidity positions. A long-short investment strategy based on this cyclical pattern of lottery stocks’ performance yields gross abnormal returns of about 12.6% per year.

Keywords: Lottery-type stocks; Turn-of-the-month effect; Gambling (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2018
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