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Volume 26, Numbers 3 & 4 / September/December 2022 , 27-59
Multinational Finance Journal, 2022, vol. 26, no. 3/4, pp. 27-59
Scott Brown , University of Puerto Rico    Corresponding Author
William T Ziemba , The University of British Columbia

Lotto tickets normally have negative expected value that sometimes turn positive with carryover or promotions. The purchase of lotto tickets by professional bettors has been shown to be rational economic behavior during these periods. The typical player is known to play continually and is subject to a regressive tax when a professional bettor wins the jackpot. We perform an out-of-sample experiment that provides countervailing evidence of an economically significant silver lining for the typical player from easier-to-win small prizes making lotto one type of investment for this demographic. In this light lotto participation by the typical player is, if not rational, less irrational in terms of prospect, strain, networking, and consumption theories. Finally, we show linkage between jackpot size and economic boom and bust in Puerto Rico

Keywords : Lotto; Prospect Theory; Portfolio Theory; Strain Theory; Networking Theory; Consumption Theory.
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