Are paper winners gamblers? Evidence from Australian retail investors. (4th October 2017)

• Record Type: Journal Article
• Authors: Frino, Alex; Lepone, Grace; Wright, Danika
• Is Part Of: Accounting and finance. Volume 59(2019)Supplement 1
• Page Start: 593
• Page End: 614
• Publication Date: 2017-10-04
• Subjects: Lottery stocks -- Gambling preference -- House money effect -- Prospect theory; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12296
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: This study examines stock market gambling using a comprehensive set of investor characteristics and past portfolio performance measures. We find that retail investors overinvest in 'lottery stocks', stocks with gambling‐like properties. Significant portfolio underperformance is the result of gambling through lottery stocks. Investors are more likely to gamble following recent portfolio paper gains, regardless of realised performance, providing new evidence that paper gains trigger a house money effect. Investors trading greater values or holding more stocks, and older and female investors, are less likely to invest in lottery stocks.