@article {Downs112, author = {Thomas W. Downs and Quan Wen}, title = {Is There a Lottery Premium in the Stock Market?}, volume = {28}, number = {1}, pages = {112--119}, year = {2001}, doi = {10.3905/jpm.2001.319827}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This research finds that extreme stock returns are associated with low{\textendash}priced stocks, which in turn are correlated with a significant decline in average returns. They infer from this finding that investors in low{\textendash}priced stocks accept lower (even negative) average returns as the premium paid for the chance to earn an extreme return. They refer to this sacrifice in average return the {\textquotedblleft}lottery premium.{\textquotedblright} Their analysis shows that the lottery premium is higher on $1 stocks than on $7 stocks; that the lottery premium has become greater over time; and that the lottery premium is higher in up markets than in down markets.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/28/1/112}, eprint = {https://jpm.pm-research.com/content/28/1/112.full.pdf}, journal = {The Journal of Portfolio Management} }