The analysis uses risk and return variables for every on-line state lottery game offered in the United States in 1995. Not only is new light shed on the determinants of lottery expenditures and player preferences for risk and return, the data set presented here provides researchers with new and comprehensive information on every lottery game offered in the county. They find evidence that while bettors at horse tracks are risk averse, bettors favor positive skewness of returns. We question whether these preferences are also true for lottery players. We test Golec and Tamarkin's theory using data on all state lottery games offered in the United States.
Empirical analyses suggest that lottery players also prefer skewness to variance.
Our findings not only expand the relevance of Golec and Tamarkin's theory, but they also provide new insight into why individuals play lottery games. I show that uninformed casual bettors are responsible for the bias, and that serious betters do the opposite, overbetting favorites and underbetting longshots. This opposite bias has been found in sports betting and in the stock market. This model provides a common framework for analyzing many other deviations from market efficiency.