TY - JOUR T1 - Is There a Lottery Premium in the Stock Market? JF - The Journal of Portfolio Management SP - 112 LP - 119 DO - 10.3905/jpm.2001.319827 VL - 28 IS - 1 AU - Thomas W. Downs AU - Quan Wen Y1 - 2001/10/31 UR - https://pm-research.com/content/28/1/112.abstract N2 - This research finds that extreme stock returns are associated with low–priced stocks, which in turn are correlated with a significant decline in average returns. They infer from this finding that investors in low–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 “lottery premium.” 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. ER -