 The role of anchoring on investors’ gambling preference: Evidence from ChinaZhuo Wang, Ziyue Wang and Ke Wu Pacific-Basin Finance Journal, 2023, vol. 80, issue C Abstract: This paper examines the anchoring effect of 52-week high price on the investors’ gambling preference in the Chinese A-share market. We document the gambling preference only exists among stocks valued much lower than their 52-week high prices. Specifically, using return skewness as a proxy for lottery stocks, we find that buying stocks in the lowest skewness quintile and selling the highest earns a significant risk-adjusted return of 0.85% per month for stocks far below their 52-week high prices. By contrast, it earns an insignificant return of 0.04% per month for stocks close to their 52-week high prices. Moreover, high arbitrage risk and investor sentiment strengthen the effect of anchoring on gambling preference. Our findings are robust after considering the effects of capital gains overhang, under-reaction to news, firm’s ownership status, and China’s non-tradable share reform. Keywords: Gambling preference; Anchoring effect; Limit to arbitrage; Investor sentiment; Chinese stock market (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:80:y:2023:i:c:s0927538x23001208 DOI: 10.1016/j.pacfin.2023.102054 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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