Lucky issuance: The role of numerological superstitions in irrational return premiums

Numerological superstitions, which lead people to regard some numbers as lucky and others as unlucky, are common in Taiwan. Analyzing a sample of all domestic companies listed on the Taiwan stock market from January 1991 to December 2015, we find that firms with lucky listing codes enjoy return premiums on the stock market. Though the return premiums are highest within one year of firm IPOs and decline in magnitude over time, they continue over the long term. We also show that lucky premiums only appear in firms with low institutional holdings, implying that individual investors are more susceptible to numerological superstitions. Furthermore, stock mispricing attributable to numerological superstitions has largely been eliminated from the market in recent years. We argue that this reflects increasing maturity in Taiwan's stock market driven by the presence of more institutional and fewer individual investors.