When do investors gamble in the stock market? |
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| Institution: | 1. College of Business Administration, Incheon National University, South Korea;2. Seoul National University Business School, South Korea;1. Smith School of Enterprise and Environment, University of Oxford, Hinshelwood Road, Oxford OX1 3QY, UK;2. School of Finance and Management – SOAS University of London, 10 Thornhaugh Street, Russell Square, London WC1H 0XG, UK;3. Department of Banking and Finance, Monash University, Caulfield, VIC 3145, Australia;4. Saïd Business School, Park End Street, Oxford OX1 2BS, UK |
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| Abstract: | Recent studies have uncovered gambling-motivated trading activities in financial markets in which investors seek lottery-type payoffs by using financial assets. Building on prospect theory, this study provides an important complement to prior research and investigates what period that investors make gambling-motivated trading in the stock market. Examining data from the Chinese stock market, investors are revealed to have asymmetric gambling preferences in gain and loss domains. Investors' gambling motivations are more easily triggered when the market is experiencing a loss. In such periods of time, investors may preferentially opt for lottery-type stocks that offer them a small chance to earn an extreme return at the risk of a likely small loss, simply due to their ‘aversion to a sure loss’. |
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