The Research Of Stock Investors’ Gambling Preferences

Gambling is a common phenomenon, it appeared in the late primitive society firstly, and the earliest gambling of China appeared in the Xia Dynasty. With the evolving of the human society, the form of gambling is also constantly changing, but gambling always exists in people’s lives. From a particular point of view, gambling is the nature of people. Gambling has always existed, gambling behavior may have been restrained by religious or government, but the gambling preferences of people have been deep-rooted. Preference for gambling, which is called "gamblingpreferences".There are many domestic studies of behavioral finance, but no empirical research of gambling preferences is applied to stock market investment. This article will use1000investors’ trading behavior to test their gambling preferences. This study is on gambling preferences of investors in the stock market, specifically this study is on the investors’ preferences for lottery-type stocks. Lottery-type stocks are defined in accordance with the characteristics of the lottery. The main features of lottery-type stocks are low stock price, high idiosyncratic skewness of stock returns. Idiosyncratic skewness, in order to exclude the impact of market, the specific calculation method is the regression of stock returns, which the independent variable is the excess market returns and the squared excess market returns. Ultimately, taking the skewness of the residuals of the regression equation as idiosyncratic skewness of stock returns.The main viewpoints of this article are as follows:Firstly, we study the meaning, characteristics as well as the psychology of analysis of gambling, and gather the research of gambling.Secondly, the article uses the sunk cost theory, prospect theory and cumulative prospect theory to explain people’s gambling preferences. These theories can explain people’s lottery-type stock preference very well. Thirdly, according to the characteristics of the lottery, the definition of lottery-type stocks is high idiosyncratic skewness and low price. Lottery-type stocks, nonlottery-type stocks and other stocks are described and compared. Final study shows that in1017stocks, there are206lottery-type stocks,207nonlottery-type stocks and604other stocks.Finally, the regression results prove that the1000individual investors do exist preference for lottery-type stocks. In addition, many theoretical studies suggest that when people are faced with the gambling behavior, gender factor may be a very important factor. We study male investors and female investors preference for lottery-type stocks respectively. The final study found that the male investors indeed exist lottery-type stock preference. But on the other hand, through empirical analysis, the female investors do not show obvious lottery-type stock preference. And the result is in line with general psychological theory that males love challenge force and have the spirit of adventure, while females are lack of the spirit of independence and adventure.