Abstract: Based on a variety of common identification indexes, using Markov regime switching model and investor sentiment index to divide the state of Chinese stock market, this paper examines the time-variable characteristics of lottery-like stocks in Chinese stock market and its reason. Research results shows that: whether it is based on “risk- return” or investor sentiment to divide the stock market state, lottery-like returns show obvious time- variation, that is, lottery-like returns are more obvious after bull market and high sentiment period, and relatively weaker after bear market and low sentiment period. Although the results of each index are different, they all show that the return difference between lottery-like stocks and other types of stocks under different “risk- return” states is greater than that under different sentiment states. Lottery-like return is mainly the result of the mispricing of lottery-like stocks caused by investors′ irrationality.

Key words: lottery-like stock;lottery-like return, time-variation, regime switching, investor sentiment