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Conference Paper: Do individual investors trade Stocks as gambling? Evidence from repeated natural experiments

TitleDo individual investors trade Stocks as gambling? Evidence from repeated natural experiments
Authors
KeywordsNatural experiments
Lottery
Stock trading
Substitution effect
Investor attention
Behavioral trading needs
Issue Date2011
Citation
The 46th Annual Meeting of the Western Finance Association (WFA), Santa Fe, N.M., 19-22 June 2011. How to Cite?
AbstractMultiple natural experiments of large jackpot lotteries in Taiwan are used to document that some individual investors trade stocks as a form of gambling. Those investors substitute lottery gambling for stock trading. This substitution effect between lottery and stock is substantiated by the following five key findings. First, when the jackpot exceeds 500 million Taiwan dollars (about 15 million U.S. dollars), the number of shares traded by individual investors decreases by about 7% among stocks with high individual trading fraction, low market capitalization, high past returns, and high past turnover. Second, the reduction in individual trading is about 7% among stocks with lottery features, i.e. high return volatility and skewness. Third, the magnitude of the decline increases monotonically with the jackpot. Fourth, firm-level trading activity reacts negatively to large jackpots, and is statistically significant for a sizable number of firms. Finally, the aggregate trading activity by individual investors declines by about 5% on large jackpot days.
DescriptionSession - Experimental Finance
Persistent Identifierhttp://hdl.handle.net/10722/141187
SSRN

 

DC FieldValueLanguage
dc.contributor.authorGao, Xen_US
dc.contributor.authorLin, Ten_US
dc.date.accessioned2011-09-23T06:27:42Z-
dc.date.available2011-09-23T06:27:42Z-
dc.date.issued2011en_US
dc.identifier.citationThe 46th Annual Meeting of the Western Finance Association (WFA), Santa Fe, N.M., 19-22 June 2011.en_US
dc.identifier.urihttp://hdl.handle.net/10722/141187-
dc.descriptionSession - Experimental Finance-
dc.description.abstractMultiple natural experiments of large jackpot lotteries in Taiwan are used to document that some individual investors trade stocks as a form of gambling. Those investors substitute lottery gambling for stock trading. This substitution effect between lottery and stock is substantiated by the following five key findings. First, when the jackpot exceeds 500 million Taiwan dollars (about 15 million U.S. dollars), the number of shares traded by individual investors decreases by about 7% among stocks with high individual trading fraction, low market capitalization, high past returns, and high past turnover. Second, the reduction in individual trading is about 7% among stocks with lottery features, i.e. high return volatility and skewness. Third, the magnitude of the decline increases monotonically with the jackpot. Fourth, firm-level trading activity reacts negatively to large jackpots, and is statistically significant for a sizable number of firms. Finally, the aggregate trading activity by individual investors declines by about 5% on large jackpot days.-
dc.languageengen_US
dc.relation.ispartofAnnual Meeting of the Western Finance Association, WFA 2011en_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectNatural experiments-
dc.subjectLottery-
dc.subjectStock trading-
dc.subjectSubstitution effect-
dc.subjectInvestor attention-
dc.subjectBehavioral trading needs-
dc.titleDo individual investors trade Stocks as gambling? Evidence from repeated natural experimentsen_US
dc.typeConference_Paperen_US
dc.identifier.emailGao, X: xiaohui@hku.hken_US
dc.identifier.emailLin, T: chunlin@hku.hken_US
dc.identifier.authorityGao, X=rp01062en_US
dc.identifier.authorityLin, T=rp01077en_US
dc.description.naturepostprint-
dc.identifier.doi10.2139/ssrn.1622184-
dc.identifier.hkuros193609en_US
dc.identifier.ssrn1622184-
dc.description.otherThe 46th Annual Meeting of the Western Finance Association (WFA), Santa Fe, N.M., 19-22 June 2011.-

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