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

Gao, Xiaohui; Lin, Tse‐Chun

doi:10.1093/rfs/hhu075

Cited by 188 publications

(89 citation statements)

References 42 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…While it is well known that a large portion of gamblers engage in gambling for fun and excitement (e.g., Binde, 2009, 2013), this also appear to be true of a significant portion of stock traders (Dorn & Sengmueller, 2009; Gao & Lin, 2015; Kumar, 2009; Ladley, Liu, & Rockey, 2016). Dorn and Sengmueller (2009) identified three forms of enjoyment that people derive from trading stock: (a) leisure, (b) aspirations of high payoffs, and (c) sensation seeking, with the latter two types of enjoyment being characterized as “gambling motives.”…”

Section: Resultsmentioning

confidence: 99%

“…Most research has found this impact to be fairly specific to lottery-style stocks having low prices, high volatility, and highly skewed returns. Gao and Lin (2015) demonstrated that when lottery jackpot size in Taiwan was high, stock market trading volume in lottery-type stocks declined by 7%–9%. This same relationship between large lottery jackpots and decreased stock trading volume has also be observed in both the United States and Germany (Dorn et al., 2012), with the impact being specific to small traders, options, and individual stocks (with no impact on bonds, mutual funds, or retirement accounts).…”

Section: Resultsmentioning

confidence: 99%

See 1 more Smart Citation

The conceptual and empirical relationship between gambling, investing, and speculation

Arthur¹,

Williams²,

Delfabbro³

2016

J Behav Addict

View full text Add to dashboard Cite

Background and aimsTo review the conceptual and empirical relationship between gambling, investing, and speculation.MethodsAn analysis of the attributes differentiating these constructs as well as identification of all articles speaking to their empirical relationship.ResultsGambling differs from investment on many different attributes and should be seen as conceptually distinct. On the other hand, speculation is conceptually intermediate between gambling and investment, with a few of its attributes being investment-like, some of its attributes being gambling-like, and several of its attributes being neither clearly gambling or investment-like. Empirically, gamblers, investors, and speculators have similar cognitive, motivational, and personality attributes, with this relationship being particularly strong for gambling and speculation. Population levels of gambling activity also tend to be correlated with population level of financial speculation. At an individual level, speculation has a particularly strong empirical relationship to gambling, as speculators appear to be heavily involved in traditional forms of gambling and problematic speculation is strongly correlated with problematic gambling.Discussion and conclusionsInvestment is distinct from gambling, but speculation and gambling have conceptual overlap and a strong empirical relationship. It is recommended that financial speculation be routinely included when assessing gambling involvement, and there needs to be greater recognition and study of financial speculation as both a contributor to problem gambling as well as an additional form of behavioral addiction in its own right.

show abstract

Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

The conceptual and empirical relationship between gambling, investing, and speculation

Arthur¹,

Williams²,

Delfabbro³

2016

J Behav Addict

View full text Add to dashboard Cite

show abstract

Section: Trading Behaviormentioning

confidence: 99%

“…Grinblatt and Keloharju (2009) use receipt of speeding tickets as a proxy for having a sensation-seeking personality and find that sensation-seeking is positively correlated with trading activity. Dorn and Sengmueller (2009) find that individuals who report that they enjoy investing or gambling trade more often, and numerous studies find that lotteries are a substitute for trading in the stock market (Barber et al, 2009a;Dorn et al, 2015;Gao and Lin, 2015).Although the conclusion that individual investors underperform on average was a consensus view in the literature for a long time, several more recent papers have found that net individual 22 buying of a stock positively predicts its future returns over horizons of a week to a month (Jackson, 2003;Kaniel et al, 2008Kaniel et al, , 2012Barber et al, 2009b;Kelley and Tetlock, 2013) or has no predictive power (Griffin et al, 2003). However, this short-term effect is negative in Asian markets (Andrade et al, 2008;Barber et al, 2009a;Choi et al, 2013).…”

mentioning

confidence: 99%

Behavioral Household Finance

Beshears

Choi

Laibson

et al. 2018

View full text Add to dashboard Cite

This chapter provides an overview of household finance. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: consumption and savings, borrowing, payments, asset allocation, and insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: education and information, peer effects and social influence, product design, advice and disclosure, choice architecture, and interventions that directly target prices or quantities. This chapter is divided into two parts, each of which is further divided into several sections. The first part summarizes key facts regarding household financial behavior, emphasizing empirical regularities that are inconsistent with the standard classical economic model and discussing both extensions of the classical model and explanations grounded in behavioral economics that can account for the observed patterns. This part covers five topics: (I) consumption and savings, (II) borrowing, (III) payments, (IV) asset allocation, and (V) insurance. The second part addresses interventions that firms, governments, and other parties deploy to shape household financial outcomes: (VI) education and information, (VII) peer effects and social influence, (VIII) product design, (IX) advice and disclosure, (X) choice architecture, and (XI) interventions that directly target prices or quantities. The final section of the paper (XII) concludes. John BeshearsWe offer broad coverage of the household finance literature, but we limit the scope of our discussion along some dimensions. We focus on the U.S. institutional context and on empirical work based on U.S. data, although we do bring evidence from other wealthy countries to bear when germane and occasionally reference evidence from developing countries. We address household asset allocation but do not draw out its implications for asset pricing, which are covered by the asset pricing chapter in this handbook. Although household decisions regarding health care are relevant to household finance, we largely omit this literature from our chapter because it is covered in depth in the chapter on behavioral health economics. Finally, there is some overlap between our section on financial product design and the chapter on behavioral industrial organization; we refer readers to that chapter for related material on that topic. Part 1: Facts I. Consumption and SavingsBeginning with the seminal work of Modigliani and Brumberg (1954) and Friedman (1957), economists have embraced the view that households choose to save and borrow to smooth consumption over the lifecycle. Intuitively, if agents have concave utility functions over consumption, then they should spread consumption across time to optimally...

show abstract

“…For evidence of investors' preference for gambling and the low-beta anomaly, see Blau, Hsu, and Whitby (2014); Bali, Brown, Murray, and Tang (2015); and . For evidence that investors in emerging markets use the stock market as a gambling substitute, see Gao and Lin (2015). For another reading of the preference-for-gambling hypothesis, see Baker, Bradley, and Wurgler (2011).…”

Section: Low Betamentioning

confidence: 99%

Will Your Factor Deliver? An Examination of Factor Robustness and Implementation Costs

Beck¹,

Hsu²,

Kalesnik³

et al. 2016

Financial Analysts Journal

View full text Add to dashboard Cite

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

Cited by 188 publications

References 42 publications

The conceptual and empirical relationship between gambling, investing, and speculation

The conceptual and empirical relationship between gambling, investing, and speculation

Behavioral Household Finance

Will Your Factor Deliver? An Examination of Factor Robustness and Implementation Costs

Contact Info

Product

Resources

About