Journal
FINANCIAL REVIEW
Volume 55, Issue 4, Pages 603-624Publisher
WILEY
DOI: 10.1111/fire.12231
Keywords
institutional investors; investor sentiment; lotteries; skewness
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This paper explores the time-varying institutional investor preference for lottery-like stocks. On average, institutional investor holdings reflect an aversion to lottery-like stocks. However, I find that an institutions' aversion to lottery-like stocks is reduced when investor sentiment is low. Moreover, I find that during low sentiment periods, institutional investors have abnormally high trading profits in more positively skewed stocks. These results suggest that institutions reduce their aversion toward lottery-like stocks during low sentiment periods to profitably trade in lottery-like stocks.
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