Price & Market BehaviorCore researchlive in production

Lottery-Stock Avoidance

Updated dailyData needs: low

In plain terms

If a stock had a few wild up-days last month, retail piles in and overpays for it — so it tends to underperform next. We fade those lottery names.

How it works

High recent maximum daily returns predict underperformance (Bali-Cakici-Whitelaw 2011) — used as a fade signal: stay flat or short when the rolling 1- or 3-month max daily return is in the top 10-20% of own history. Two variants per lookback: flat_when_lottery (zero exposure during the lottery regime) and short_when_lottery (active short capturing the full underperformance).

Live results

30 times picked on its own · 130 times inside a blend (116 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 130 such blended picks (116 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

Loading substrate evidence…

Data dependencies

Daily bars
Daily OHLCV bars used by all price-based generators.

Expected edge

Reported return: ~1%/month L/S (Bali-Cakici-Whitelaw 2011)
Tested over: 1962-2005

~1% per month long-short (Bali-Cakici-Whitelaw 2011)

Example tickers where this is likely to fire

GME AMC BBBY

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

Return-Skew PremiumEconomy & Policy

Stocks with fat downside tails (negative realized skew) trade at a discount and earn a premium; right-skew 'lottery' stocks underperform.

Low-Volatility PremiumEconomy & Policy

Counterintuitive: high-idiosyncratic-vol stocks UNDERPERFORM. So short the high-IVOL names, long the steady ones.

Explore Lottery-Stock Avoidance on alphactor.ai

See which tickers this family is currently firing on, with live signals and rankings.

Open universe with this filter →Browse all 571 families