Lottery preference and stock market participation: evidence from China

Abstract

Purpose

This paper studies the effects of lottery preference on stock market participation at the macro level.

Design/methodology/approach

The authors use the abnormal search volume intensity for lottery-related keywords from the Baidu search engine to capture retail investors' lottery preference. To measure stock market participation, they use five different macro-level measures from various angles. They perform the time series regression analysis in their empirical study.

Findings

First, the validation tests show that the lottery preference index in this study is reasonable. Further, the authors find that lottery preference increases people's propensity to enter and trade in the stock market. Besides, they find that the effect on trading behavior is asymmetric, that is, high lottery preference has a more significant impact on trading behavior than low lottery preference. However, lottery preference has no significant effect on the stockholding.

Originality/value

This paper contributes to the growing literature that examines the determinants of stock market participation and the role of lottery/gambling preference in the financial market. It also provides direct and novel evidence for Statman's (2002) conclusions about the similarity of lottery players and stock traders.

Citation

Zhang, T., Wei, D., Liu, Z. and Wu, X. (2023), "Lottery preference and stock market participation: evidence from China", China Finance Review International, Vol. 13 No. 1, pp. 46-62. https://doi.org/10.1108/CFRI-01-2021-0008