139 NTU Management Review Vol. 31 No. 3 Dec. 2021 The foreign institutional investors may split their orders for stealth trading, withholding information, or reducing price impact. By contrast, retail investors tend to invest in lotterylike stocks habitually. The trading activities of retail investors concentrate on lotterylike stocks and submit orders aggressively. They also tend to exhibit correlated order flow of such stocks. Moreover, excess return comovement of lottery-like stocks is mainly attributable to the trading activities of retail investors. Third, when the overall market gambling sentiment is high (e.g., when the stock market is bullish, experiencing an economic boom, the lottery market receiving little attention, or during the Chinese New Year period), retail investors increase the demand for lottery-like stocks, which further strengthens the excess return comovement of lottery-like stocks. In addition, stock-level gambling sentiment changes drastically in months when stock issuers release their financial statements, and the fact that some stock issuers release their financial statements in the same months, which further adds to the level of excess return comovement of lottery-like stocks. However, the effect of retail investors’ trading behavior on this comovement does not increase when the stock price is much lower than the 52-week high. Finally, the excess return comovement in lottery stocks cannot affect stock issuers’ expenditure on R&D and the quality of their financial statements. 4. Research Limitations/Implications Asset pricing is usually performed by investors based on conventional risk factors, which, however, cannot explain the return comovement among lottery-like stocks. Therefore, investors may expose themselves to undiversifiable systemic risks arising from gambling trading and do not have appropriate required rates of return. Thus, investors may overestimate the intrinsic value of lottery-like stocks and construct portfolios inappropriately, leading to poor investment performance. Our empirical results can avoid aforementioned overestimation while provide insight to investors for the establishment of their portfolios. The literature on systemic factors that cause the return comovement of lottery-like stocks predominantly focuses on gambling sentiment and economic conditions. This study is the first to detail how such comovement is affected by other factors related to the market-level speculative behaviors (e.g., sentiment for the bullish stock market, attention to the lottery market, or during the Chinese New Year period) and stock-level speculative behaviors (e.g., release of financial statements or the proximity of a stock’s current price
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