New research paper worth scanning on parallels between gambling and lottery-style stocks:
This study shows that peopleâ€™s propensity to gamble and their investment decisions are correlated. At an aggregate level, individual investors prefer stocks with lottery features, and like lottery demand, the demand for lottery-type stocks increases during economic downturns. In the cross-section, socioeconomic factors that induce
greater expenditure in lotteries are associated with greater investment in lottery-type stocks. Further, these investment levels are higher in regions with favorable lottery environments. Because lottery-type stocks under-perform, gambling-related under-performance is greater among low-income investors who excessively overweight lottery-type stocks. Collectively, these results indicate that state lotteries and lottery-type stocks attract very similar socioeconomic clienteles.
Now I can finally stop explaining to people that the price moves in Fannie/Freddie are no more meaningful than tradable lottery tickets.