Featured Research

from universities, journals, and other organizations

Investors Who 'Gamble' In The Stock Market Have Same Characteristics As Lottery Players

Date:
February 28, 2009
Source:
University of Texas at Austin, McCombs School of Business
Summary:
The socioeconomic characteristics of people who play state lotteries are similar to investors who pick stocks with a lottery quality -- high risk with a small potential for high return, and just like the lottery, returns on average are lower for those who invest this way in the stock market.

The socioeconomic characteristics of people who play state lotteries are similar to investors who pick stocks with a lottery quality—high risk with a small potential for high return, and just like the lottery, returns on average are lower for those who invest this way in the stock market, research from The University of Texas at Austin shows.

Alok Kumar, assistant professor of finance at the McCombs School of Business at The University of Texas at Austin, presents evidence of this counter-productive stock-market behavior after studying the demographics and financial transactions of 70,000 anonymous investors.

"We found that people who took risks with lottery-type stock typically earned 2 to 3 percent less than other investors," Kumar said.

Kumar defines lottery-type stocks as those with a share price under $5 and a history of high volatility and extreme positive returns. These stocks are inexpensive and come with a high chance of losing, but they also offer the small potential for a big payoff.

Kumar's research found that people with household income below average for their area are more likely to buy lottery-type stocks, and that they are purchased in areas with high unemployment and during economic downturns. In addition, regions with higher concentrations of Catholics such as in Massachusetts and Rhode Island have a stronger preference for lottery-type stocks, while those in Protestant regions like areas in the South are less drawn to them—a pattern that also mirrors ticket-purchasing trends in state lotteries by the two groups.

"It is particularly important to be aware of our gambling tendencies now because the urge to gamble is greater during difficult economic times," Kumar said. "Stock market 'gambles' are unlikely to pay off, and those who are close to retirement are likely more vulnerable to this urge because they might feel they only have a short time period to recoup their losses. Unfortunately, this behavior can further worsen their situation and delay recovery."


Story Source:

The above story is based on materials provided by University of Texas at Austin, McCombs School of Business. Note: Materials may be edited for content and length.


Journal Reference:

  1. Alok Kumar. Who Gambles In The Stock Market? Journal of Finance, (in press)

Cite This Page:

University of Texas at Austin, McCombs School of Business. "Investors Who 'Gamble' In The Stock Market Have Same Characteristics As Lottery Players." ScienceDaily. ScienceDaily, 28 February 2009. <www.sciencedaily.com/releases/2009/02/090226110655.htm>.
University of Texas at Austin, McCombs School of Business. (2009, February 28). Investors Who 'Gamble' In The Stock Market Have Same Characteristics As Lottery Players. ScienceDaily. Retrieved September 3, 2014 from www.sciencedaily.com/releases/2009/02/090226110655.htm
University of Texas at Austin, McCombs School of Business. "Investors Who 'Gamble' In The Stock Market Have Same Characteristics As Lottery Players." ScienceDaily. www.sciencedaily.com/releases/2009/02/090226110655.htm (accessed September 3, 2014).

Share This



More Mind & Brain News

Wednesday, September 3, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Can You Train Your Brain To Eat Healthy?

Can You Train Your Brain To Eat Healthy?

Newsy (Sep. 1, 2014) New research says if you condition yourself to eat healthy foods, eventually you'll crave them instead of junk food. Video provided by Newsy
Powered by NewsLook.com
Coffee Then Napping: The (New) Key To Alertness

Coffee Then Napping: The (New) Key To Alertness

Newsy (Aug. 30, 2014) Researchers say having a cup of coffee then taking a nap is more effective than a nap or coffee alone. Video provided by Newsy
Powered by NewsLook.com
Young Entrepreneurs Get $100,000, If They Quit School

Young Entrepreneurs Get $100,000, If They Quit School

AFP (Aug. 29, 2014) Twenty college-age students are getting 100,000 dollars from a Silicon Valley leader and a chance to live in San Francisco in order to work on the start-up project of their dreams, but they have to quit school first. Duration: 02:20 Video provided by AFP
Powered by NewsLook.com
Baby Babbling Might Lead To Faster Language Development

Baby Babbling Might Lead To Faster Language Development

Newsy (Aug. 29, 2014) A new study suggests babies develop language skills more quickly if their parents imitate the babies' sounds and expressions and talk to them often. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins