Retail investors′ preference and stock market gambling premium: A study based on China′s stock market

• Published in: Zhejiang da xue xue bao. Journal of Zhejiang University. Sciences edition. Li xue ban Vol. 51; no. 4; pp. 459 - 471
• Main Authors: Pan, Sujuan, Ding, Jie
• Format: Journal Article
• Language: Chinese
• Published: Hangzhou Zhejiang University 01.07.2024; Zhejiang University Press
• Subjects: Bivariate analysis; bivariate grouping(双变量分组); cross sectional regression(截面回归); Gambling; gambling premium(博彩溢价); Institutional investments; Investors; Market value; Preferences; Pricing; retail preference(散户偏好); Securities markets; Stock exchanges; subsample analysis(子样本分析)
• ISSN: 1008-9497
• DOI: 10.3785/j.issn.1008-9497.2024.04.009

In order to explore the different preferences between retail investors and professional investors, this paper constructs the index of retail investors' preference based on the shareholding ratio of institutional investors and a series of stock characteristics of retail investors' preference. Based on this index, this paper further studies the relationship between retail investors' preference and gambling premium in Chinese stock market: (1) the results of bivariate grouping and company level cross-sectional regression show that the higher the retail investors' preference is, the higher the gambling premium is. Even for the gambling variables that have no pricing power in the whole sample, they still show significant pricing power in the stocks with the strongest retail preference. (2) Based on the method of sub sample analysis, it shows that after eliminating part of the retail investors' preference for stocks, the gambling variables in the remaining stocks lose their pricing power. Stocks with a gaming premi