Topic: Lottery-Related Anomalies: The
Role of Reference-Dependent Preferences
Speaker: Li An, Assistant Professor,
PBC School of Finance, Tsinghua University
Date: April 17th, 2015 (Fri.)
Time: 12:30-1:30pm
Location: Building
1, Room 501, Faculty Lounge
Language: English
Abstract:
This paper studies the role of reference-dependent
preferences in explaining several anomalies related to lottery-like assets.
Recent studies find that lottery-like assets significantly underperform
non-lottery-like assets. Previous explanations usually rely on investors'
unconditional preference for lottery-like assets, probably due to their overweighting
of small probability events. We show that lottery-related anomalies are significant
only among stocks where investors have lost money. Among stocks where investors
have profited, evidence for lottery-related anomalies is either very weak or even
reversed. Our findings provide support for the reference-dependent preference under
which investors are averse to losses and will prefer lottery-like assets
following prior losses as such assets provide a chance to recover losses. Our findings
are robust to five different measures of the lottery feature of stocks and
provide a unified framework to understand lottery-related anomalies that are
associated with these measures.
About the speaker:
Li An is currently an assistant professor at PBC
School of Finance, Tsinghua University. Li received her Ph.D. in Economics
from Columbia University in 2014, where she worked with Professor Kent Daniel
and Professor Paul Tetlock. Li’s research interests mainly lie in empirical
asset pricing and behavioral finance. One area of her research is to understand
how investor behavior affects equilibrium price dynamics. Other themes include
return anomalies, institutional investors, and pension investments. Li’s
research connects theory and practice and has been recognized by several
academic and professional awards, including Crowell Memorial Prize by PanAgora
Asset Management and Chicago Quantitative Alliance (CQA) Academic Competition.
