Gambling and investing: Do low-risk gamblers outperform non-gamblers in the stock markets?

摘要

This is a comparative analysis of whether or not an individual's level of non-investment gambling will have a significant impact on the individual's investment portfolio results. The portfolio's results have been adjusted for market risk factors. What was statistically determined is whether or not low-risk (social/recreational) gamblers out-perform, under-perform, or perform no differently in the equity markets on a risk-adjusted basis as opposed to investors who are non-gamblers. The performance of problem gambler's and pathological gambler's investment results is not a primary focus of this study.; The research was conducted in Greater Cincinnati, Ohio. A snowball sampling technique was employed to collect the data. The study employed quantitative research methodology using a retrospective and cross-sectional approach. One hundred and twenty-two questionnaires and informed consent forms were distributed beginning February 24, 2003. Thirty-three responses (27%) were received by the submission cut-off date of April 15, 2003 of which twenty-eight returns (23%) were usable. Confidentiality was maintained by requesting that names not be included on the questionnaire and investment statements. The gambling prevalence levels determined in this study fell within national norms of gambling prevalence.; The major finding of this study indicates a difference in the mean Jensen's alpha of the non-gambling group, as compared to the mean Jensen's alpha for the low-risk gambling group, amounting to a statistically significant 3.82%. This study shows that low-risk gamblers out-perform non-gamblers in the equity markets even after adjusting the returns for the amount of risk in both groups' portfolios.; This study has implications for the investment advising community relating to the design of a more appropriate investment portfolio based upon the investor's gambling practices, for government in its role of reviewing gambling's harmful effects, for entities involved in the business of gambling, and for academia through this study's inclusion in the body of scholarly literature in the developing field of behavioral finance.