How Do Financial Market Outcomes Affect Gambling?

We study the impact of realized equity premium and stock market volatility on aggregate gamblingexpenditures. We expect the wealth effect of higher realized returns will increase gambling (enter-tainment good), but also attract gamblers to equity markets, lowering aggregate wagers. Similarly,we expect rising volatility will attract gamblers to equity markets (thrill and skewed payouts), butalso curtail gambling in response to growing economic uncertainty. Utilizing a novel horse wa-gering data (1934-2020), we find the net impact of these countervailing forces is a reduction ingambling expenditures. Using corporate bond spreads as a proxy for business cycles, we find gam-bling expenditures rise during recessions. Price of wagering, per capita income, and availabilityof competing betting products are other important drivers of gambling. Our findings will be ofinterest to the gaming industry and policy makers, particularly as day trading, sports betting, onlinecasinos, and other gambling forms gain broad public acceptance