Lottery
A signal built from the most extreme recent positive daily return, designed to capture lottery-like payoff preference.
Anomalies
Lottery 1
Definition phase
Definition
The lottery signal measures the maximum daily return observed over the prior month. Higher values indicate that a stock recently experienced a more extreme positive payoff spike, while lower values indicate a less lottery-like return path.
The underlying intuition is that some investors overpay for stocks with lottery-like upside, especially after a single dramatic positive day makes the name look unusually exciting.
Inside the finance research stack, the representative implementation sorts the Russell 1000 cross-section on the MAX measure and compares the low-MAX names against the high-MAX names in a market-neutral spread.