We study lottery behavior in banking stocks and use MAX/MIN to capture loss protection from bank bailout guarantees. We find that bank lottery preferences lead to lower short-term returns and that regulatory TARP assistance increases the likelihood of bank lotteryness and risk taking....

Contrary to public perception and previous literature on public bailout subsidies, we find over the recent 43-year period equityholders in big banks paid fairly for TBTF bailout insurance in terms of equity returns. In normal (non-crisis) periods, after TBTF in 1984, big banks pay an...

We add to the explanatory theory of skewness by showing how real options generate convexity of payoffs and skewness of returns. We show empirically that real growth options are significant, positive, and robust determinants of idiosyncratic skewness over and above previously reported...