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Gambling Preference and the New Year Effect of Assets with Lottery Features

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Author Info
Doran, James
Jiang, Danling
Peterson, David

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Abstract

This paper examines whether investors exhibit a New Year's gambling preference and whether such preference impacts prices and returns of assets with lottery features. In January, calls options have higher demand than put options, especially by small investors. In addition, relative to at-the-money calls, out-of-the-money calls are the most expensive and actively traded. In the equity markets, lottery-type stocks in the US outperform their counterparts mainly in January, but tend to underperform in other months. Lottery-type Chinese stocks outperform in the Chinese New Year month, but not in January. This New Year effect provides new insights into the broad phenomena related to the January effect.

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File URL: http://mpra.ub.uni-muenchen.de/9258/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9258.

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Date of creation: 08 Apr 2008
Date of revision: 10 Mar 2009
Handle: RePEc:pra:mprapa:9258

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Related research
Keywords: January effect; Gambling; Preference for skewness; Out-of-the-money options; China;

Other versions of this item:

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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