Previous empirical studies find that lottery-like stocks significantly underperform their non-
lottery-like counterparts. Using five different measures of the lottery features in the literature,
we document that the anomalies associated with these measures are state dependent: the
evidence supporting these anomalies is strong and robust among stocks where investors
have lost money, whereas among stocks where investors have gained profits, the evidence
is either weak or even reversed. Several potential explanations for such empirical findings …

The views in this paper are those of the authors and do not necessarily reflect the views of
the Federal Reserve Bank of Dallas or the Federal Reserve System.[...] To construct RCGO,
we follow Frazzini (2006) by cross-sectionally regressing the raw CGO on previous 12-and
36-month returns, the previous one-year average turnover, the log of market equity at the
end of the previous month, a NASDAQ dummy, an interaction term between the turnover and
previous 12-month returns, and an interaction term between the turnover and the NASDAQ …