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Neighborhood effects on speculative behavior

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  • Mitton, Todd
  • Vorkink, Keith
  • Wright, Ian

Abstract

Speculative behavior plays a key role in numerous markets, but little is known about its causes. We test for neighborhood effects on speculative behavior using daily lottery sales data from 20 states in the U.S. In a sample of 160,000 retailers, lottery sales in a census block increase by $0.26, on average, for each $1 increase in neighboring blocks. We test whether this correlation is attributable to contextual effects, correlated effects, or endogenous effects. Our analysis suggests that social interaction is an important cause of speculative behavior.

Suggested Citation

  • Mitton, Todd & Vorkink, Keith & Wright, Ian, 2018. "Neighborhood effects on speculative behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 151(C), pages 42-61.
    • Handle: RePEc:eee:jeborg:v:151:y:2018:i:c:p:42-61
    DOI: 10.1016/j.jebo.2018.04.020
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    More about this item

    Keywords

    Speculative behavior; Neighborhood effects; Social interaction; Lottery; Skewness preference;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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