Abstract
The primary aim of this study is to determine whether there is any association between stocks with lottery-like characteristics and the analyst revisions carried out on such stocks. Given that lottery-like stocks generally tend to be overpriced and have inferior performance to non-lottery-like stocks, analysts are more likely to issue downgrade recommendations on the former than the latter. Analysts have the ability to identify which lottery-like stocks are ‘dark horses’ with good investment potential, and indeed, their revisions on lottery-like stocks are generally found to have a larger stock-price impact than those on non-lottery-like stocks. Lottery-like stocks are also associated with sentiment-driven overpricing, with market sentiment potentially strengthening the negative price response to revisions from ‘buy’ to ‘sell’ for lottery-like stocks; however, such sentiment can also weaken the positive price response to revisions from ‘sell’ to ‘buy’ for lottery-like stocks.
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