Business Cycles, Stock Market Wealth and Gambling at the Racetracks

We examine the impact of stock market wealth and business cycles on gambling. Rising stock market wealth is expected to increase expenditures on entertainment goods, including gambling. Conversely, rising volatility is expected to draw betting outlays to the stock markets. Gambling is also expected to rise during recessions. Utilizing a novel horse wagering data and a dynamic demand model, we study the impact of these forces on gambling at racetracks. We find that price of wagering, incomes, and supply of races are the primary determinants of demand. Wagering is negatively impacted by realized stock returns and market volatility, but rises during recessions