Time-Varying Demand for Lottery: Speculation Ahead of Earnings Announcements

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Discipline Group 
Research Seminars in Finance
 
Topic: Time-Varying Demand for Lottery: Speculation Ahead of Earnings Announcements
 
Speaker: Jianfeng Yu, University of Minnesota
 
Abstract: Existing studies find that compared to non-lottery stocks, lottery-like stocks tend to be overpriced and earn lower subsequent returns, probably due to investor preferences for lottery-like assets. We argue that investor preferences for holding speculative assets are more pronounced ahead of firms’ earnings announcements, probably due to lower inventory costs and immediate payoffs. We show that there is indeed stronger demand for lottery-like stocks ahead of earnings announcements, leading to a price run-up for these stocks. In sharp contrast to the standard underperformance of lottery-like stocks, we find that lottery-like stocks outperform non-lottery stocks by about 52 basis points in the 5-day window ahead of earnings announcements. However, this return spread is reversed by 75 basis points within five days after the announcements. Moreover, this inverted-V shaped pattern on cumulative return spreads is more pronounced among firms with more retail order imbalance, with low institutional ownership, and in regions with stronger gambling propensity
 
A light lunch will be provided at 1p.m. Please RSVP for catering purposes to Mala Kapahi by 12 noon on Monday, 28th August.
 
Date: Wednesday, 30th August 2017      
Time: 12.00 – 1.00 p.m.
Venue: University of Technology, Sydney
            Building 8
            Dr Chau Chak Wing Building
            14 - 28 Ultimo Road, Ultimo
 
Co-ordinator: Adrian Lee (Ph: +61 2 9514 7765)
 
Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)
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UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.