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
The University of Hong Kong - Faculty of Business and Economics
The Hong Kong Polytechnic University - School of Accounting and Finance
October 12, 2016
Forthcoming: Management Science
Do superstitious traders lose money? 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 “superstition index” for each investor, is positively correlated with trading losses. Superstitious investors lose money mainly because of their bad market timing and stale orders. Nevertheless, the reliance on number superstition for limit order submissions does decrease with trading experience.
Number of Pages in PDF File: 80
Keywords: superstition, limit order clustering, investment performance, individual investors
JEL Classification: D14, G02, G14, G15
Date posted: August 10, 2014 ; Last revised: October 14, 2016