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A closer look at the substitution effects between retail trading and national lotteries

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  • Liang, Qiqi
  • Sun, Licheng

Abstract

We provide the first comprehensive study on the substitution effects between U.S. national lotteries and retail trading activities. Due to data limitations, prior studies are limited to evidence from local or international markets such as California, Taiwan, and Germany. Utilizing two unique U.S. datasets on retail trading activities, we provide convincing evidence of a substitution effect from large jackpots of U.S. national lotteries on retail trading. However, surprisingly, a reverse substitution effect from stocks exhibit significant gambling attributes on lottery participation is not observed. Thus, we uncover a puzzling phenomenon that the substitution effect only goes in one direction.

Suggested Citation

  • Liang, Qiqi & Sun, Licheng, 2024. "A closer look at the substitution effects between retail trading and national lotteries," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006275
    DOI: 10.1016/j.frl.2024.105597
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    References listed on IDEAS

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    More about this item

    Keywords

    Retail trading; Lotteries; Substitution effects; Narrow framing; Investor behavior;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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