Do Superstitious Traders Lose Money?
Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management
National Chengchi University (NCCU) - Department of International Business
University of Hong Kong - Faculty of Business and Economics
The University of Hong Kong
May 28, 2015
27th Australasian Finance and Banking Conference 2014 Paper
Is trading based on superstition harmful? We answer this question in the context of trading in the Taiwan Futures Exchange, where we exploit the Chinese superstition that the number “8” is lucky and the number “4” is unlucky. We find that individual investors, but not institutional investors, submit disproportionately more limit orders at “8” than at “4”. This imbalance, defined as the “superstition index,” is positively correlated with trading losses. These losses arise at all price points, not just at “8” and “4,” suggesting that superstition may be a symptom of financial unsophistication. Nevertheless, superstition does decrease with trading experience.
Number of Pages in PDF File: 62
Keywords: superstition, financial sophistication, limit order clustering, investment performance, individual investors
JEL Classification: D14, G02, G14, G15
Date posted: August 10, 2014 ; Last revised: May 29, 2015
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