Investor demand and performance of lottery-like stocks: evidence from the Thai stock market

Abstract

This study examines the relationship between stocks with lottery-like characteristics and trading activity and returns in the Thai stock market (SET and MAI, 2002–2025). Thailand is well-suited for this study, given its strong lottery culture and retail investors' 35–50% share of trading volume. Using the Lottery-Like Index (LLI) framework of Gould et al. (2023), based on idiosyncratic volatility, idiosyncratic skewness, inverse price, maximum daily return, and negative past return, this study assesses lottery-likeness for 948 stocks across 122,196 stock-month observations, applying two-way fixed-effects panel regressions with trading turnover (H1) and FFC4-adjusted abnormal returns (H2) as dependent variables. The results show that stocks with higher LLI scores are associated with significantly higher trading turnover, though this relationship weakens over time, consistent with increasing market efficiency. For H2, the results confirm a lottery tax of approximately -0.41% per year, which intensifies in the post-COVID period even as trading activity has moderated. The lottery tax is most pronounced among retail-dominated and SET-listed stocks. Daily mood seasonality analysis shows that trading activity declines while the lottery tax intensifies around holidays, contrary to Gould et al. (2023), suggesting liquidity and substitution effects characteristic of emerging markets. This study extends the LLI framework to an emerging market context, highlighting how lottery-like characteristics are associated with market inefficiencies and a return penalty of approximately -0.41% per year for stocks with high LLI scores.