Searching for Gambles: Gambling Sentiment and Stock Market Outcomes
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
61 Pages Posted: 25 Jul 2015 Last revised: 8 Feb 2021
Date Written: February 12, 2020
Abstract
Using Internet search volume for lottery to capture gambling sentiment shifts, we show that when the overall gambling sentiment is strong, investor demand for lottery stocks increases, these stocks earn positive short-run abnormal returns, managers are more likely to split stocks to cater to the increased demand for low-priced lottery stocks, and initial public offerings (IPOs) earn higher first day returns. Further, the sentiment-return relation is stronger among low institutional ownership firms, headquartered in regions where gambling is more acceptable and local bias is stronger. These results suggest that gambling sentiment has a spillover effect on the stock market.
Keywords: Gambling sentiment; lottery-type stocks; investor attention; catering; stock splits; IPO first-day return
JEL Classification: G11; G12; G14
Suggested Citation: Suggested Citation