Preference for lottery-like securities

Turan G. Bali and Quan Wen

Chapter 3 in Handbook of Financial Decision Making, 2023, pp 63-90 from Edward Elgar Publishing

Abstract: We provide an overview of the literature investigating investors’ demand for lottery-like securities. We use established measures of lottery payoffs and examine their implications for the cross-sectional pricing of individual stocks and mutual funds. We present empirical evidence from portfolio-level analyses and stock/fund-level cross-sectional regressions that show (i) the robustness of the lottery demand phenomenon using an extended dataset, (ii) the impact of investor clientele (retail vs. institutional investors) and investor attention on the lottery demand effect, (iii) significant time-series variation in investors preferences for lottery-like securities, and (v) the incremental contribution of the lottery demand factor to established factor models. October 2022

Keywords: Business and Management; Economics and Finance (search for similar items in EconPapers)
Date: 2023
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