Do Individual Investors Treat Trading as a Fun and Exciting Gambling Activity? Evidence from Repeated Natural Experiments

Xiaohui Gao; Tse-Chun Lin

doi:10.1093/rfs/hhu075

Do Individual Investors Treat Trading as a Fun and Exciting Gambling Activity? Evidence from Repeated Natural Experiments

¹ Finance Department, Smith Business School, University of Maryland · ² Faculty of Business and Economics, University of Hong Kong

Review of Financial Studies 2015

We hypothesize that individual investors treat trading as a fun and exciting gambling activity, implying substitution between this activity and alternative gambling opportunities. To examine this hypothesis, we study the lottery jackpots and the trading of individual investors in Taiwan. When the jackpots exceed 500 million Taiwan dollars, the trading volume decreases between 5.2% and 9.1% among stocks preferred by individual investors and between 6.8% and 8.6% among lottery-like stocks. The decline in individual buy volume is statistically indistinct from the decline in sell volume. Large jackpots are associated with less trading in options with high sensitivity to volatility.

DOI: 10.1093/rfs/hhu075
Volume: 28 (7)
Pages: 2128-2166
Language: en
Export: BibTeX
Sources: crossref openalex