Abstract
We provide the first comprehensive study on the substitution effects between U.S. national lotteries and retail trading activities. Due to data limitations, prior studies are limited to evidence from local or international markets such as California, Taiwan, and Germany. Utilizing two unique U.S. datasets on retail trading activities, we provide convincing evidence of a substitution effect from large jackpots of U.S. national lotteries on retail trading. However, surprisingly, a reverse substitution effect from stocks exhibit significant gambling attributes on lottery participation is not observed. Thus, we uncover a puzzling phenomenon that the substitution effect only goes in one direction.
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