Abstract: The stock market has always been a key area to prevent systemic financial risks in China, and the gambling behavior of investors is an important factor leading to and exacerbating China′s stock market volatility and asset price bubbles. Based on the wrong pricing perspective of investor sentiment, this paper analyses the causes of investors′gambling behavior and negative abnormal returns, namely “gambling returns”, from both theoretical and empirical perspectives, providing a behavioral financial explanation. The research finds that the gambling return is due to the overvaluation of stock price caused by investors′behavior deviation; after the high emotional period, the degree of stock mispricing is more obvious, and the gambling return is more obvious after the high emotional period; the change of investors′ irrational degree will also affect the degree of mispricing of gambling stock, then affecting gambling income.

Key words: gambling behavior, lottery-like return, investor sentiment, mispricing