We test the hypothesis that retail investors’ attraction to lottery stocks induces overvaluation, and is amplified by high attention and social interactions. The lottery premium (negative abnormal returns) is stronger for high-retail-ownership stocks—especially those that also have high analyst coverage, high latest absolute earnings surprises, or extreme recent positive returns. The premium is also larger for high-retail-ownership stocks headquartered in counties with high social interactions, proxied by headquarter population density or Facebook social connectivity. Google search activities in response to large extreme returns are also consistent with the role of attention in attracting investors to lottery stocks.
More here – SSRN
PS: The short version is investors like new shiny objects particularly if other people like the new shiny object and even more so if professional shiny object hunters tell them it is the best shiny object since the last shiny object.