Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/225980 
Year of Publication: 
2020
Series/Report no.: 
CFR Working Paper No. 20-08
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
We provide evidence regarding mutual funds' motivation to hold lottery stocks. Funds with higher managerial ownership invest less in lottery stocks, suggesting that managers themselves do not prefer such stocks. The evidence instead supports that managers cater to fund investors' preference for such stocks. In particular, funds with more lottery holdings attract larger flows after portfolio disclosure compared to their peers, and poorly performing funds tend to engage in risk shifting by increasing their lottery holdings towards year-ends. Funds' aggregate holdings of lottery stocks contribute to their overpricing.
Subjects: 
lottery stocks
risk shifting
fund performance
investor flows
stock mispricing
JEL: 
G11
G23
Document Type: 
Working Paper

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