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Herding on lottery-type stocks: evidence from the Chinese stock market

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  • Pu Gong
  • Jun Dai

Abstract

Previous studies have provided evidence that investors have gambling propensity in the stock market and exhibit a preference for lottery-type stocks. In this study, we use high total skewness and high maximum daily return (MAX) to measure lottery-type stocks and examine whether investors do exhibit distinct herding pattern in these stock types. Empirical results show that investors display stronger herding among lottery-type stocks, thereby indicating that such stocks induce correlated behaviour with the investors. In addition, we find that stocks with the highest skewness exhibit stronger herding under upmarkets, whereas stocks with the lowest skewness display stronger herding under downmarkets. Regarding the highest MAX portfolio, no significant herding asymmetry is seen between upmarket and downmarket. The results reported in this article demonstrate that comovement in stock returns may be partly attributed to the nonstandard preferences of investors in the stock market.

Suggested Citation

  • Pu Gong & Jun Dai, 2018. "Herding on lottery-type stocks: evidence from the Chinese stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 25(10), pages 659-662, June.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:10:p:659-662
    DOI: 10.1080/13504851.2017.1355532
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    Cited by:

    1. Puput Tri Komalasari & Marwan Asri & Bernardinus M. Purwanto & Bowo Setiyono, 2022. "Herding behaviour in the capital market: What do we know and what is next?," Management Review Quarterly, Springer, vol. 72(3), pages 745-787, September.

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