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Do Superstitious Traders Lose Money?

Forthcoming: Management Science

80 Pages Posted: 10 Aug 2014 Last revised: 14 Oct 2016

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Weiyu Kuo

National Chengchi University (NCCU) - Department of International Business

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Jing Zhao

The Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: October 12, 2016

Abstract

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.

Keywords: superstition, limit order clustering, investment performance, individual investors

JEL Classification: D14, G02, G14, G15

Suggested Citation

Bhattacharya , Utpal and Kuo, Weiyu and Lin, Tse-Chun and Zhao, Jing, Do Superstitious Traders Lose Money? (October 12, 2016). Forthcoming: Management Science. Available at SSRN: https://ssrn.com/abstract=2478124

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Weiyu Kuo

National Chengchi University (NCCU) - Department of International Business ( email )

Taipei City
Taiwan

Tse-Chun Lin (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Jing Zhao

The Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Room 733, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong
Hong Kong

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