Why do mutual funds hold lottery stocks?

Arbeitspapier

We provide evidence regarding mutual funds' motivation to hold lottery stocks. Funds with higher managerial ownership invest less in lottery stocks, suggesting that managers themselves do not prefer such stocks. The evidence instead supports that managers cater to fund investors' preference for such stocks. In particular, funds with more lottery holdings attract larger flows after portfolio disclosure compared to their peers, and poorly performing funds tend to engage in risk shifting by increasing their lottery holdings towards year-ends. Funds' aggregate holdings of lottery stocks contribute to their overpricing.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFR Working Paper ; No. 20-08

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
• Subject: lottery stocks ; risk shifting ; fund performance ; investor flows ; stock mispricing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Agarwal, Vikas ; Jiang, Lei ; Wen, Quan
• Event: Veröffentlichung
• (who): University of Cologne, Centre for Financial Research (CFR)
• (where): Cologne
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/225980
• Last update: 10.03.2025, 11:42 AM CET