The gambling preference and stock price: Evidence from China's stock market

Zhu, Hongbing; Zhang, Bing; Yang, Lihua

doi:10.1016/j.ememar.2021.100803

Cited by 20 publications

(7 citation statements)

References 27 publications

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“…The excessive risk is taken by these investors is not compensated by the markets; hence, their investments result in losses. The more they trade in the market more they lose (Zhu et al. , 2021).…”

Section: Discussionmentioning

confidence: 99%

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Does the low-risk anomaly exist in the Indian equity market? A test using alternative risk measures

Ali

Badhani

Kumar

2021

JES

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PurposeThis study aims to investigate the risk-return trade-off in the Indian equity market at both the aggregate equity market level and in the cross-sections of stock return using alternative risk measures.Design/methodology/approachThe study uses weekly and monthly data of 3,085 Bombay Stock Exchange-listed stocks spanning over 20 years from January 2000 to December 2019. The study evaluates the risk-return trade-off at the aggregate equity market level using the value-weighted and the equal-weighted broader portfolios. Eight different risk proxies belonging to the conventional, downside and extreme risk categories are considered to analyse the cross-sectional risk-return relationship.FindingsThe results show a positive equity premium on the value-weighted portfolio; however, the equal-weighted portfolio of these stocks shows an average return lower than the return on the 91-day Treasury Bills. The inverted size premium mainly causes this anomaly in the Indian equity market as the small stocks have lower returns than big stocks. The study presents a strong negative risk-return relationship across different risk proxies. However, under the subsample of more liquid stocks, the low-risk anomaly regarding other risk proxies becomes moderate except the beta-anomaly. This anomalous relationship seems to be caused by small and less liquid stocks having low institutional ownership and higher short-selling constraints.Practical implicationsThe findings have important implications for investors, managers and practitioners. Investors can incorporate the effects of different highlighted anomalies in their investment strategies to fetch higher returns. Managers can also use these findings in their capital budgeting decisions, resource allocations and other diverse range of direct and indirect decisions, particularly in emerging markets such as India. The findings provide insights to practitioners while valuing the firms.Originality/valueThe study is among the earlier attempts to examine the risk-return trade-off in an emerging equity market at both the aggregate equity market level and in the cross-sections of stock returns using alternative measures of risk and expected returns.

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Section: Discussionmentioning

confidence: 99%

“…Individual retail investors dominate the Indian equity market, and these investors are known to consider equity investment as gambling (Kumar, 2009; Gao and Lin, 2015; Dorn et al. , 2015; Zhu et al. , 2021) and invest in lottery stocks with risk-seeking attitude.…”

Section: Introductionmentioning

confidence: 99%

Does the low-risk anomaly exist in the Indian equity market? A test using alternative risk measures

Ali

Badhani

Kumar

2021

JES

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“…Other studies find a "lottery-stock premium" at least for the stock market in Hong Kong (Chan and Chui, 2016). Another study on the Chinese stock market points in a similar direction (Zhu et al, 2021). Nevertheless, this preference seems to be dependent on the general market trend, as.…”

Section: Substitution E Ects Between the Gambling And The Financial M...mentioning

confidence: 83%

Gambling and financial markets a comparison from a regulatory perspective

Weidner

2022

Front. Sociol.

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This article discusses similarities between the finance industry and the gambling industry. It considers empirical studies from both fields and compares both industries with regard to possible substitution effects. Afterwards, the current regulatory approach to gambling and financial markets is discussed. Based on this literature review, the author points out that regulators need to acknowledge the fact that both markets possess addictive properties and attract certain risk-seeking individuals. Moreover, the regulators need to find a way to align their fundamentally different objectives to find common solutions to cross-industry problems. Finally, an increased cooperation between (state) authorities is necessary. This cooperation could help to protect traders from developing gambling-related problems, provide significant insights for industry-wide and product-specific regulation and lead to a more informed use of technology for harm prevention purposes. The most important similarities and differences of both markets and the resulting regulatory implications are briefly summarized.

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“…On the topic of stock market, most articles such as [6][7][8], focus on the main people who gamble and the impact on the market. However, they lack a practical understanding of the spread of gambling.…”

Section: Contributionmentioning

confidence: 99%

Application of the model in the stock market

Zhang

Ruan²,

Guo

et al. 2023

Fifth International Conference on Computer Information Science and Artificial Intelligence (CISAI 2022)

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There have always been many people in contact with the stock market. Many of them will become gamblers who block everything, and some will die. There are also a small number of people who will make profits from the stock market and become a calm stockholder. Around these people, some people will often be infected by these people in the stock market. After knowing some stock market conditions, they join the stock market, we establish two models to analyze this kind of people who contact the stock market. After our research, we find that the number of gamblers will be maintained at a certain number, and the government will also intervene in management.

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The gambling preference and stock price: Evidence from China's stock market

Cited by 20 publications

References 27 publications

Does the low-risk anomaly exist in the Indian equity market? A test using alternative risk measures

Does the low-risk anomaly exist in the Indian equity market? A test using alternative risk measures

Gambling and financial markets a comparison from a regulatory perspective

Application of the model in the stock market

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