Someone like you: Lottery-like preference and the cross-section of expected returns in the cryptocurrency market

This study sketches how crypto speculators place their bets and investigates the impact of speculative behavior on cryptocurrency pricing. We conjecture that investors favor comparable alternatives to well-known, successful cryptocurrencies as compensation for missed get-rich-quick opportunities. Our verification begins with developing a composite lottery identification indicator that encapsulates the unique characteristics of cryptocurrencies. Intriguing findings involve the following: A low price effect exists in the cryptocurrency market; small and illiquid cryptocurrencies no longer exhibit superior performance within the most speculative portfolios; investors' lottery-like preferences are time-varying and differ across cryptocurrencies with different features. Collectively, these findings corroborate our conjecture from various angles.