Gamble or Growth: The Role of Lottery Features in BRIC Stock Markets Amidst Varying Environmental, Social, Governance and Economic Conditions

This study aims to investigate the behavioural characteristics of lottery-featured stocks (LFS) in BRIC stock markets (Brazil, Russia, India and China) from the perspective of behavioural finance. Employing a top–bottom tercile portfolio approach, the research focuses on lottery feature stocks alongside the index with expected stock returns under varying economic conditions, such as environmental, social and governance (ESG), economic growth and unemployment rate. The data for this investigation were meticulously collected from BRIC country’s stock markets, spanning from January 1993 to December 2021. The findings support the predictions of the prospect theory, suggesting that investors perceive companies with high idiosyncratic skewness as riskier and demand a higher risk premium for holding these stocks in Russia and Brazil. The results indicate a consistent negative relationship between Brazil and Russia’s stock returns and lottery features. The study also highlights the importance of considering idiosyncratic risk in investment decisions and sheds light on why investors demand higher expected returns. The findings suggest that future research should explore the robustness of this relationship across different periods and countries to better understand the economic significance of lottery features stocks and indices with expected stock returns.