Gambling preferences and fund company ownership: Evidence from China

Fan Xu

International Review of Economics & Finance, 2024, vol. 95, issue C

Abstract: This paper empirically tests the preference of China's public mutual funds for lottery-type equities, analyzing data from equity funds in the country's public mutual fund market from 2005 to 2022. The study finds that this gambling preference positively correlates with short-term fund performance, but negatively impacts long-term outcomes. Further investigation shows that the funds' propensity for gambling increases stock market volatility. However, fund company ownership can mitigate this risk amplification by implementing a risk-sharing structure. Additionally, a significant positive correlation exists between the mutual fund industry's gambling inclination and fund managers' optimism about future market movements. Finally, this article employs text analysis to explore the influence of gambling preferences from a non-quantitative information perspective, which helps control the investing behavior of institutional investors and enhances the real economy's access to the capital market.

Keywords: Gambling preferences; Mutual fund; Fund company ownership; Text analysis (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:95:y:2024:i:c:s1059056024004179

DOI: 10.1016/j.iref.2024.103425

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