Institutional Trading, Investor Sentiment and Lottery-Like Stock Preferences
Alldredge, D.M., 2019. Institutional trading, investor sentiment, and lottery‐like stock preferences. Financial Review.
41 Pages Posted: 4 Mar 2018 Last revised: 28 Sep 2020
Date Written: November 19, 2018
Abstract
This paper explores the time-varying institutional investor preference for lottery-like stocks. On average, institutional investor holdings reflect an aversion to lottery-like stocks. However, I find that an institutions’ aversion to lottery-like stocks is reduced when investor sentiment is low. Moreover, I find that during low-sentiment periods institutional investors have abnormally high trading profits in more positively skewed stocks. These results suggest that institutions reduce their aversion towards lottery-like stocks during low-sentiment periods to profitably trade in lottery-like stocks.
Keywords: institutional trading, investor sentiment, lotteries, skewness
JEL Classification: G11, G14, G23, G41
Suggested Citation: Suggested Citation