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Monthly cyclicality in retail Investors’ liquidity and lottery-type stocks at the turn of the month

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  • Meng, Yun
  • Pantzalis, Christos

Abstract

The well-documented underperformance of lottery stocks masks a within-month cyclical pattern. Demand for lottery stocks increases at the turn of the month, especially in areas whose demographic profile resembles that of typical lottery-ticket buyers (i.e., gamblers), thus driving their prices higher. This effect is rooted in local retail investors’ preference for lottery stocks and propelled by the within-month cyclicality of local investors’ personal liquidity positions. A long-short investment strategy based on this cyclical pattern of lottery stocks’ performance yields gross abnormal returns of about 12.6% per year.

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  • Meng, Yun & Pantzalis, Christos, 2018. "Monthly cyclicality in retail Investors’ liquidity and lottery-type stocks at the turn of the month," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 176-191.
    • Handle: RePEc:eee:jbfina:v:88:y:2018:i:c:p:176-191
    DOI: 10.1016/j.jbankfin.2017.11.012
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    Cited by:

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    More about this item

    Keywords

    Lottery-type stocks; Turn-of-the-month effect; Gambling;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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