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

ArXiv ID: 2507.01993 “View on arXiv”

Authors: Aaron Abrams, Skip Garibaldi

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.

Keywords: lottery ticket, portfolio analysis, expected return, investment strategy, risk allocation, lottery tickets

Complexity vs Empirical Score

• Math Complexity: 7.5/10
• Empirical Rigor: 3.0/10
• Quadrant: Lab Rats
• Why: The paper employs advanced mathematics including portfolio theory and probabilistic modeling to derive theoretical criteria for lottery investments, but lacks empirical backtesting, implementation details, or statistical validation, focusing instead on theoretical results.

  flowchart TD
    A["Research Question:<br>When is a lottery ticket<br>a good bet?"] --> B["Key Methodology:<br>Portfolio Analysis"]
    B --> C{"Data & Inputs:<br>Lottery Parameters &<br>Market Rates"}
    C --> D["Computation:<br>Expected Return &<br>Risk Allocation"]
    D --> E["Outcome 1:<br>Positive Expected Return<br>under specific conditions"]
    D --> F["Outcome 2:<br>Optimal Strategy:<br>Very small allocation"]