Ex-Day Behavior When Investors and Professional Traders Assume Reverse Roles: The Case of Danish Lottery Bonds |
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| Institution: | 1. Department of Finance, Copenhagen Business School, Solbjerg Plads 3, Frederiksberg, 2000, Denmark;2. Norwegian School of Management and CEPR, Box 580, Sandvika, N-1302, Norway;1. Accountancy, Economics, and Finance Department, Heriot-Watt University, Edinburgh, EH14 4AS, United Kingdom;2. Cairo University Business School, Egypt;1. University of Otago, Department of Accountancy and Finance, Dunedin, New Zealand;2. Charles University, Institute of Economic Studies, Prague, Czechia;1. W.P. Carey School of Business, Arizona State University, Tempe, AZ 85287, United States;2. Faculty of Business, Ozyegin University, Istanbul 34794, Turkey;1. Division of Economics and Business, Colorado School of Mines, 1500 Illinois St., Golden, CO 80401, USA;2. Department of Economics, McGill University, 855 Sherbrooke St. W., Montreal, Quebec H3A 2T7, Canada;1. Civil Engineering Department, Nottingham Trent University, UK;2. College of Engineering, Mathematics and Physical Sciences, University of Exeter, UK |
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| Abstract: | Lottery bonds are Danish Treasury obligations which make coupon payments by lottery. Professional traders have a tax preference for the coupon lottery, while investors are tax-neutral and take the other side of the trade. Consistent with tax-based explanations of abnormal ex-day returns, we find that prices fall by more than the lottery mean. Surprisingly, we also find that the price drop over the lottery decreases with the lottery variance. This suggests that investors do not like the lottery. In fact, the Danish Treasury has been able to sell more lottery bonds only by offering above market interest rates. Journal of Economic Literature Classification Numbers: G12, G35, G63. |
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