ABSTRACT
Using the abnormal search volume intensity for lottery-related keywords from the Baidu search engine, we construct a daily and provincial lottery preference index in China and re-examine the relationship between lottery preference and stock market return. Consistent with the previous studies, we find that when lottery preference is high, stocks will earn a positive return in the short-run, but this effect will reverse in the next few periods. We also have some new findings: (1) the total effect of lottery preference is mainly driven by the global preference but not the local preference; (2) the positive effects of the global part will last longer among regions with stronger lottery preference, and only in these regions, local lottery preference has a positive impact in the short-run. (3) there is an asymmetric effect that during the bull market, the short-term positive effect of lottery preference persists longer, and it delays the reversal process.
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Correction Statement
This article has been republished with minor changes. These changes do not impact the academic content of the article.
Notes
1 Chen, Kumar, and Zhang (Citation2020) use the state-level search volume intensity (SVI) to define strong (weak) states. However, in our paper, the SVIs from Baidu Index are absolute values rather than relative values, so they are not comparable across regions. Therefore, we use per capita lottery expenditure instead.