Fund Flows and Fund Performance on Lottery Funds

Chun-Yen Chen (), Hong-Yi Chen and Hsiao-Yin Chen ()
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Chun-Yen Chen: National Chengchi University, Zhinan Road, Wenshan District, Taipei 11605, Taiwan
Hong-Yi Chen: National Chengchi University, Zhinan Road, Wenshan District, Taipei 11605, Taiwan
Hsiao-Yin Chen: Chung Yuan Christian University, Zhongbei Road, Zhongli District, Taoyuan City 320314, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2024, vol. 27, issue 03, 1-35

Abstract: This study introduces a new indicator to measure the lottery-like degree of financial products by considering their idiosyncratic volatility and skewness. The findings indicate that investors tend to purchase funds that hold lottery-like stocks, while investors prefer lottery-like funds when the market sentiment is high. However, funds holding lottery-like stocks and those exhibiting lottery traits experience relatively lower adjusted returns in the next quarter. Interestingly, when the market sentiment is high, investors can obtain better performance only from funds that hold lottery-like stocks, indicating that investors may be better off selecting lottery-holding funds rather than lottery-like funds during periods of high sentiment. Overall, our study sheds light on investor behavior and the impact of market sentiment on fund flows and performance in lottery-like funds.

Keywords: Investor behavior; lottery-holding fund; lottery-like fund; market sentiment; investor behavior (search for similar items in EconPapers)
JEL-codes: C10 G35 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0219091524500176

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