Join educated investors who get actionable, evidenced-based wealth management insights delivered directly to their inbox.
Subscribe
Strategic Investment Advisors, LTD

Investors Like Lotteries

There’s substantial evidence from the field of behavioral finance that individual investors have a strong preference for investments that exhibit the same characteristics as lottery tickets. Two of these characteristics are high kurtosis (or fat tails) and positive skewness, meaning values to the right of (or more than) the mean are fewer but farther from it than values to the left of (or less than) the mean.

And just as is the case with lottery tickets, this preference leads investors to overinvest in the most highly skewed (right-skewed) securities. Increased demand leads to higher prices, with the consequence being that such securities will have lower subsequent average returns.

Read the rest of the article on ETF.com.

Contact Us
©2024 Strategic Investment Advisors, Ltd. | Website Design by Evolutionize

Strategic Investment Advisors, Ltd. is a registered investment adviser with the states of Missouri and Illinois and may only transact business with residents of those states, or residents of other states where otherwise legally permitted to exemption or exclusion from registration requirements.