“If You Think Investing is
Gambling, You’re Doing it Wrong!”
Warren Buffet
Jennifer Arthur, M.Sc.
PhD Candidate, University of Adelaide Supervisor: Dr. Paul Delfabbro
10th European Conference on Gambling Studies and Policy Issues
Investing versus Gambling
• Investing has economic utility; gambling does not.
• Investing has positive expected returns; gambling has negative.
• Gambling can be addictive and destructive, investing is healthy.
• Investors are risk-averse; gamblers are risk-seekers.
• Investing is long-term process; gambling focuses on immediate outcomes.
• Investing is based on skill and knowledge; whereas gambling is based on luck and emotions.
“On Wall Street, Gambling is Called
Innovation and Clients are Called
Idiots” Jon Stewart
Media
'We lost everything gambling on shares'
As do-it-yourself investing goes mainstream, one couple lost their life savings by using a tool meant for professionals
Gianpaolo Prinzi and Fernanda Freitas “invested” in shares for their retirement, but lost
£180,000 in doing so
Public Perception
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Buying Instant Win Tickets Playing EGMs (slots, video lottery terminals) Bingo for Money Buying Lottery Tickets Casino Table Games for Money Horse/Dog Race Betting Paying to Enter Tournament with Cash Prizes Buying High-risk Stocks Betting on Sports Spending $ on Games at Fairs for Prizes Playing Games vs. Other People for $ Buying "Blue Chip" Stocks Games vs Other People for no $ Taking Emotional or Physical Risks Buying Raffle or Fundraising Tickets Starting a Business Purchasing Insurance
% of North American Adults Indicating whether they consider the Activity to be 'Gambling' (n = 12,843)
Reproduced with permission from Williams, Stevens, &Nixon (2011)
Formal Definitions
Investing – putting money into an asset with the
expectation of capital appreciation, dividends, and/or interest earning. This may or may not involve research.
Most or all forms of investment involve some risk.
Gambling – staking money or material goods on an event with an uncertain outcome where the outcome of the event determines whether the stake is lost or
additional money or material goods is won.
• Three elements: Stake, Prize, and Chance
Investing or Gambling?
• Day-Trading ?
• Penny Stocks ?
• Derivatives (Options, Futures, Swaps)?
• Betting on Financial Indices?
• Professional Sports Handicapping or Poker Playing?
• Card counting?
Research Questions
• Do gamblers play the stock market and vice versa? If so, to what extent?
Does their pattern of gambling differ from gamblers who do not play the stock market?
• Is there a stronger relationship between gambling and more ‘speculative’ stock market products? (e.g., 'penny stocks’, day trading)?
• Is there a relationship between problem gambling and high-risk stock play?
Day-Trading? If so, do existing problem gambling instruments capture problematic high-risk stock play?
• Who are the high-risk stock players? What differentiates them from others?
• Are there investor subgroups and if so what differentiates investor subgroups?
Sample
• Secondary data analysis of 8498 Canadian adults surveyed via RDD in 2007/2008
• Response Rate 46.6%
• Last major prevalence study of gambling in Canada
• Included questions about stock market investing
Stock Market Questions
• Do you yourself buy and sell on the stock market?
• In the past 12 months, have you purchased any high-risk stocks, options, or futures?
• Roughly how much money do you put into high-risk stocks, options, or futures in a typical year?
• About how often do you check the value of these investments in a typical MONTH?
• What do you estimate is your net loss or gain in the past 12 months from high-risk stocks, options, or futures?
• In your lifetime, what do you estimate is your net loss or gain from investing in high-risk stocks, options or futures?
• In the past 12 months, have you done any ‘day trading’ on the stock market, where you buy and sell stocks several times on the same day?
• How often do you day trade in atypical MONTH?
• What do you estimate is your net loss (or gain) in the past 12 months from day trading?
• In your lifetime, what do you estimate is your net loss (or gain) from day trading?
Total Sample
N = 8498
Gamblers
n= 6010 (70.7%)
Have NOT Independently Traded Stocks, Options,
or Futures on the Stock Market
n = 5443 (90.5%)
Traded Stocks, Options, or Futures on the Stock
Market
n = 534 (8.9%)
Have NOT Traded High- Risk Stocks, Options, or
Futures
n = 393 (71.3%)
Traded High-Risk Stocks, Options, or Futures/Day Traded
n = 154 (29.3%)
Results
Multivariate Analyses
Binary logistic regressions differentiating:
• Gamblers who independently buy/sell on the stock market compared to gamblers who do not.
• Gamblers who independently buy/sell high-risk stocks, options, or futures/day trade compared to gamblers who do not
Stepwise entry
• IVs: age, gender, ethnicity, marital status, education, employment status, household income, household debt, physical disability, mental health (past year), past month tobacco use, past month alcohol use, past month drug use, number of gambling formats gambled on, frequency of play on each format, CPGI scores
Differences between Gamblers who Independently Buy/Sell on the Stock Market compared to Gamblers who do not
Variable Regression
Coefficients (B) Wald Statistics Odds Ratios
Household Income .176 306.520** 1.193
Employment 98.325**
Part-Time (-.508) 14.372** .602
Self-Employed .502 33.744** 1.652
Retired (-.219) 4.662 .803
Unemployed (-1.124) 14.474** .325
Homemaker (-.565) 8.800* .568
Student (-.211) 1.327 .810
Disability (-1.471) 9.938* .230
Past Month Alcohol Use .518 52.294** 1.679
Gender .494 65.488** 1.638
Ethnicity 61.240**
Ethnicity (Asian) .973 49.464** 2.646
Ethnicity (Other) (-.191) 6.124* .826
Age .017 38.636** 1.017
Household Debt (-2.349) 35.216** 10.478
Horse/Dog Racing Frequency .382 27.647** 1.465
Bingo Frequency (-.176) 12.847** .839
Skill-Based Games Frequency .105 11.578* 1.110
Table Games Frequency .226 9.900* 1.254
Instant Win Frequency (-.068) 9.500* .934
Lottery Frequency .057 7.801* 1.059
Past Month Tobacco Use (-.195) 8.125* .822
Constant -2.926 282.072** .054
*p < .01 NAGELKERKE R SQUARED = 24.6%.
**p < .001 OVERALL PREDICTION SUCCESS = 68.1%
Differences between Gamblers who Buy/Sell High-Risk Stocks or Day Trade compared to Gamblers who do not
Variable Regression
Coefficients (B) Wald Statistics Odds Ratios
Household Income .209 350.373** 1.232
Gender 1.033 226.496** 2.809
Ethnicity 172.903**
Asian 1.645 118.799** 5.183
other (-.531) 35.947** .588
Employment Status 152.533**
Retired (-.522) 18.665** .593
Self-employed .716 65.563** 2.047
Other (-.718) 38.722** .488
Marital Status 84.755**
Married (-.572) 29.532** .564
Widowed (-.471) 6.093 .624
Divorced (-.656) 22.193** .519
Never Married .158 1.720 1.171
Past Month Alcohol Use .758 77.660** 2.133
Number of Gambling Formats .245 43.178** 1.278
Casino Table Game Frequency .521 41.173** 1.684
Instant Win Frequency (-.161) 34.156** .852
EGM Frequency (-.276) 32.603** .759
Horse/Dog Racing Frequency .399 28.567** 1.491
Sports Betting Frequency (-.088) 4.136 .916
Problem Gambling Status .609 7.225* 1.838
Past Month Tobacco Use (-.435) 33.122** .647
Age .017 29.528** 1.017
Physical Disability (-.338) 8.093* .713
Household Debt (-2.419) 28.046** 11.235
Constant (-4.203) 179.058** .015
*p < .01 NAGELKERKE R SQUARED = 40.9%
**p < .001 OVERALL PREDICTION SUCCESS = 75.0%
Conclusions
•
Only 8.9% of gamblers also independently buy/sell on the stock market (so, not that common an activity among
gamblers)
•
However, these people still fairly similar to ‘regular’ gamblers in many ways in that they engage in same number of gambling formats and are no different in terms of problem gambling
status.
•
Also no different in terms of marital status, education, drug use, mental health status, and presence of physical disability.
Conclusions
•
Some differences identified (partly due to a very large sample size) but only 24.6% of the variance explained and only 68.1%
classification accuracy.
• Demographically - more likely to be: employed (especially self- employed or full-time); male; Asian; older; and to have lower household debt, higher incomes.
• More likely to use alcohol and less likely to use tobacco.
• Game Play – higher frequency of participation in horse race betting, skill-based social betting, casino table games, and lotteries; and less likely to play bingo and instant win tickets.
Conclusions
• So, are ‘high risk stock’ players more similar to ‘regular gamblers’?
• Yes and No.
• No, in sense that differences between the groups is greater (variance explained increases to 40.9% and classification accuracy increases to 75%)
• These people have higher incomes, more likely to be male, Asian, retired, self- employed, living common-law, use alcohol, not use tobacco, not have physical disability, lower debt.
• Yes, in the sense that these people have greater involvement in traditional
gambling (play more formats) leading to significantly higher rates of problem gambling. Also have higher frequency involvement in casino table games, horse race betting
.
Limitations
• Constrained by the parameters of secondary data analysis
•
Could not compare non-gamblers
•
Buying or selling ‘high-risk stocks, options, or futures’ is
not the wording I would have used (as some people use
these products to actually hedge risk)
Thank you for your attention!
Acknowledgements: University of Adelaide, Dr. Paul Delfabbro, and Dr. Robert Williams
Differences between Gamblers who Independently Buy/Sell High-Risk Stocks, Options, or Futures/Day Trade compared to Gamblers who only Buy/Sell Low- Risk Stocks/D
Variable
Regression
Coefficients (B) Wald Statistics Odds Ratios
Marital Status 15.067**
Married (-.694) 5.270* .499
Widowed (-.675) 1.640 .509
Divorced (-.896) 4.719* .408
Never Married .146 .159 1.157
Income .104 11.293** 1.110
Casino Table Games Frequency .636 9.505** 1.889
CPGI (Total Score) 1.166 6.763** .312
Gender .525 6.291* 1.690
Physical Disability (-.726) 4.783* .484
Constant .304 .303 1.355
*p < .05 NAGELKERKE R SQUARED = 17.7%
**p < .01 OVERALL PREDICTION SUCCESS = 64.8%
