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Superstition and stock price crash risk

Author

Listed:
  • Bai, Min
  • Xu, Limin
  • Yu, Chia-Feng (Jeffrey)
  • Zurbruegg, Ralf

Abstract

We investigate a new channel that leads to firm-specific stock price crash risk. By using Chinese superstition towards unlucky numbers as a platform for our analysis, we find that investor overreaction to negative news from firms with unlucky listing codes is a mechanism through which superstition affects crash risk. We also show that the effect of superstition on crash risk is more pronounced during volatile periods, down markets, and for more opaque firms. Our results suggest that superstition acts as a substitute for information and leads to adverse consequences when investors are faced with greater uncertainty.

Suggested Citation

  • Bai, Min & Xu, Limin & Yu, Chia-Feng (Jeffrey) & Zurbruegg, Ralf, 2020. "Superstition and stock price crash risk," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:pacfin:v:60:y:2020:i:c:s0927538x19302598
    DOI: 10.1016/j.pacfin.2020.101287
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    More about this item

    Keywords

    Firm-specific stock price crash risk; Superstition; Investor overreaction;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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