Online sports betting is growing rapidly around the world. We describe how the competitive structure of the bookmaking market affects odds when bettors disagree about the probabilities of the outcomes of sporting events but are on average correct. We show that the demand for bets on longshots is...

In this article we assess if German private investors gamble at the stock market. For this purpose, we replicate Kumar’s (2009) methodology and analyze the pricing of lottery-type stocks in the German stock market. We further employ data from Deutsche Bundesbank’s Securities Holdings...

We study an endowment economy with heterogeneous agents and two complementary consumption goods, one of which is indivisible. Although agents have standard concave preferences, the indivisibility gives rise to Friedman-Savage convexity in indirect utility. Agents care about relative, not just...

Using several multi-factor models, I find strong "betting against beta'' effects - flat relations between betas and expected returns - for most non-market factors in US and international stock markets. "Arbitrage portfolios'' designed to profit from these effects earn average returns similar to...

Frazzini and Pedersen (2014) document that a betting against beta strategy that takes long positions in low-beta stocks and short positions in high-beta stocks generates a large abnormal return of 6.6% per year and they attribute this phenomenon to funding liquidity risk. We demonstrate that...

The paper shows that lottery-like stocks are hedges against unexpected increases in market volatility. The loading on the aggregate volatility risk factor explains low returns to stocks with high maximum returns in the past (Bali, Cakici, and Whitelaw, 2011) and high expected skewness (Boyer,...

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....

This paper offers evidence from two very different settings consistent with individual investors substituting between playing the lottery and playing the stock market. In the U.S., increases in the multi-state lottery jackpots Powerball and Mega-Millions are associated with significant...

We study the perceived discrepancy between power conference and mid-major college football teams by examining outcomes of games when these teams face one another. We find that point spreads are set statistically irrationally in games where power conference teams play mid-major teams. We examine...