연구성과

금주의우수논문

SSCI Article
Enhancing the profitability of lottery strategies
민병규
  1. 성명민병규()
  2. 소속경제금융대학 경제금융학부
  3. 캠퍼스
  4. 우수선정주2022년 11월 4째주
Author
민병규 (Coll Econ & Finance) corresponding author; Min, Byoung-Kyu (Coll Econ & Finance);
Corresponding Author Info
Min, BK(해당 저자), Hanyang Univ, Coll Econ & Finance, 222 Wangsimni Ro, Seoul 04763, South Korea.
E-mail
minbk@hanyang.ac.kr
Document Type
Article
Source
JOURNAL OF EMPIRICAL FINANCE Volume:69 Issue: Pages:166-184 Published:2022
External Information
http://dx.doi.org/10.1016/j.jempfin.2022.09.003
Abstract
Recent studies show that lottery strategies, buying non-lottery type stocks and shorting lottery -type stocks, earn positive returns on average. This study examines whether the profitability of lottery strategies is predictable, and, more importantly, whether such predictability is exploited to enhance their performance. As a predictor, we employ the speculation sentiment index recently developed by Davies (forthcoming) based on observable trading activity in the leveraged Exchange Traded Funds market. We find that the profitability of lottery strategies is predictable by the lagged speculation sentiment index both in sample and out of sample. We propose active trading rules that are implementable in real time and dynamically switch the long and short legs on the lottery strategies exploiting the predictive power of speculation sentiment. The proposed dynamic strategies significantly outperform the passive strategies, yielding significant economic gains for investors with certainty equivalent return gains of 7.41%-26.35% and increases in annualized Sharpe ratios of 0.37-1.15.
Web of Science Categories
Business, Finance; Economics
Funding
Hanyang University [HY-2022]; IREC, The Institute of Finance and Banking, Seoul National University
Language
English
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