Finding good bets in the lottery, and why you shouldn't take them

TL;DR

This paper establishes a criterion for positive expected returns in large lotteries and demonstrates that optimal strategies involve minimal investment in such tickets, highlighting the limited attractiveness of lottery bets.

Contribution

It introduces a new criterion for positive expected returns in lotteries and applies elementary portfolio analysis to recommend minimal investment strategies.

Findings

Positive expected return criterion for certain lotteries

Optimal strategies involve very small lottery investments

Lottery tickets generally not attractive for large investments

Abstract

We give a criterion under which the expected return on a ticket for certain large lotteries is positive. In this circumstance, we use elementary portfolio analysis to show that an optimal investment strategy includes a very small allocation for such tickets.