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Searching for Gambles: Gambling Sentiment and Stock Market Outcomes

Published online by Cambridge University Press:  01 July 2020

Yao Chen ,
Alok Kumar Open the ORCID record for Alok Kumar [Opens in a new window]  and
Chendi Zhang
Yao Chen
Affiliation:
University of Exeter Business [email protected]
Alok Kumar*
Affiliation:
University of Miami
Chendi Zhang
Affiliation:
University of Exeter Business [email protected]
*
[email protected] (corresponding author)
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Abstract

Using Internet search volume for lottery to capture gambling sentiment shifts, we show that when the overall gambling sentiment is strong, investor demand for lottery stocks increases, these stocks earn positive short-run abnormal returns, managers are more likely to split stocks to cater to the increased demand for low-priced lottery stocks, and initial public offerings (IPOs) earn higher first day returns. Further, the sentiment-return relation is stronger among low institutional ownership firms, headquartered in regions where gambling is more acceptable and local bias is stronger. These results suggest that gambling sentiment has a spillover effect on the stock market.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 6 , September 2021 , pp. 2010 - 2038
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank an anonymous referee, Jawad Addoum, Nick Barberis, Hendrik Bessembinder (the editor), Linquan Chen, Zhi Da, Daniel Dorn (the referee), Marc Goergen, Roman Kozhan, Jinfei Sheng, Richard Taffler, Jeff Wurgler, and seminar participants at the 2016 China International Conference in Finance, 2016 FMA Annual Meeting, 2016 EFMA Annual Meeting, 2019 Exeter Prize Workshop, Cardiff University, University of Exeter, University of Miami, University of Surrey, and University of Warwick for helpful comments and suggestions. All remaining errors and omissions are ours.

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