Guo, Haifeng and Hung, Chi-Hsiou and Kontonikas, Alexandros and Zeng, Yeqin (2023) Flight to Lottery Ahead of FOMC Announcements: Institutional Investors or Retail Investors? British Journal of Management, 35 (2). pp. 1076-1096. DOI https://doi.org/10.1111/1467-8551.12755
Guo, Haifeng and Hung, Chi-Hsiou and Kontonikas, Alexandros and Zeng, Yeqin (2023) Flight to Lottery Ahead of FOMC Announcements: Institutional Investors or Retail Investors? British Journal of Management, 35 (2). pp. 1076-1096. DOI https://doi.org/10.1111/1467-8551.12755
Guo, Haifeng and Hung, Chi-Hsiou and Kontonikas, Alexandros and Zeng, Yeqin (2023) Flight to Lottery Ahead of FOMC Announcements: Institutional Investors or Retail Investors? British Journal of Management, 35 (2). pp. 1076-1096. DOI https://doi.org/10.1111/1467-8551.12755
Abstract
This paper studies the pre-Federal Open Market Committee (FOMC) announcement drift at the stock level. We hypothesize that investors have a higher propensity to speculate before the monetary policy announcements by the FOMC, due to the resolution of uncertainty and associated reduction in investors' fear. Indeed, we find evidence that there exists a drift of lottery-like stocks in the pre-FOMC window, when investors' fear gauge is lower, together with higher demand for lottery-like stocks and higher realized skewness. Moreover, we show that the demand for lottery-like stocks ahead of FOMC announcements is more prominent among institutional investors than retail investors. Our findings also identify the key role of transient and quasi-index institutional investors in our documented flight-to-lottery effect. Our findings advance the ongoing debates about the role of firms' investor heterogeneity in determining how monetary policy affects corporate managers' decisions. Our paper has important implications for central banks and managers by showing that investors' preference for lottery-like stocks increases before FOMC announcements.
Item Type: | Article |
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Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 23 Aug 2023 09:46 |
Last Modified: | 30 Oct 2024 21:02 |
URI: | http://repository.essex.ac.uk/id/eprint/35985 |
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Filename: British J of Management - 2023 - Guo.pdf
Licence: Creative Commons: Attribution-Noncommercial-No Derivative Works 4.0