The Effect Of Lottery Demand On The Stock Market During Changing Economic Conditions: A Case Study Of Pakistan (PSX).
https://doi.org/10.5281/zenodo.17549308
Keywords:
Macroeconomic indicators, Stock Market Volatility, Idiosyncratic Volatility, Lottery Stocks, Momentum Strategies. Pakistan Stock Exchange, PSX.Abstract
The study aims to evaluate the economic cycles of four previous governments and the influence of economic shocks on stock prices. Quantile regression and portfolio sorting examine the effects of economic uncertainty on stock returns, volatility, and investor sentiment. The robustness study employs cross-sectional regression using the Fama-MacBeth method. Elections make markets less stable and lower returns. People were uncertain about the elections due to the 2008 global financial crisis. It caused stock prices to go down. Researchers discovered that stocks with idiosyncratic volatility (IVOLT) and skewness (ISKEN) are similar to lottery tickets. It means that when things are unclear, investors tend to prefer safer assets. Stocks like MAXRET(1) and MAXRET(5), which have very high returns over one and five days, tend to underperform when political stability is unstable. It supports the notion that changes in inflation, interest rates, and exchange rates make riskier stocks worth less. The economy can influence how the market operates and cause prices to fluctuate rapidly because trading based solely on momentum is ineffective.
