Lotto Max fever is gripping Canada, with a $50 million jackpot up for grabs this Friday for the fourth time. Interestingly, according to June 2010 study by two University of Hong Kong professors, there appears to be a connection between lotteries and stock-market investing.
They found that the number of shares traded by individual investors on the Taiwan Stock Exchange falls an average 6% when the twice weekly national lottery in Taiwan has a jackpot over $16 million (U.S.). Furthermore,trading volumes from individual investors drop off more as the size of the lottery jackpot increases. And this substitution effect is stronger in stocks with high individual trading volumes, small caps and low-priced stocks.
The authors conclude that investing is lottery-like for some investors. They are seeking the entertainment and thrills of gambling and when more exciting gambling opportunities come along, they are willing to switch. I wonder if the same thing is going on in Canada, especially now with the frenzy over Lotto Max?