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Superstition and Risk Taking: Evidence from “Zodiac Year” Beliefs in China

Author

Listed:
  • Ray Fisman

    (Department of Economics, Boston University, Boston, Massachusetts 02215)

  • Wei Huang

    (School of Finance, University of International Business and Economics, Beijing 100029, China)

  • Bo Ning

    (School of Management, Xiamen University, Fujian 361005, China)

  • Yue Pan

    (School of Economics, Xiamen University, Fujian 361005, China)

  • Jiaping Qiu

    (DeGroote School of Business, McMaster University, Hamilton, Ontario L8S 4E8, Canada)

  • Yongxiang Wang

    (SAIF, Shanghai Jiaotong University, Shanghai 200030, China; School of Management and Economics, Chinese University of Hong Kong, Shenzhen, Shenzhen 518172, China)

Abstract

We show that superstitions—beliefs without scientific grounding—impact the investment and risk-taking of Chinese firms. We focus on widely held beliefs in bad luck during one’s “zodiac year,” which occurs on a 12-year cycle around a person’s birth year, to study superstitions and risk taking. We first show a direct correspondence between zodiac year and risk taking via survey data: respondents are two percentage points more likely to favor no-risk investments if queried during their zodiac year. Turning to corporate decision making, we find that return volatility declines in the chairman’s zodiac year, suggesting a reduction in risk taking overall. Focusing on specific types of risk taking, investment in R&D and corporate acquisitions both decline during the chairman’s zodiac year; returns around acquisition announcements are also lower, suggesting real allocative consequences of zodiac year beliefs.

Suggested Citation

  • Ray Fisman & Wei Huang & Bo Ning & Yue Pan & Jiaping Qiu & Yongxiang Wang, 2023. "Superstition and Risk Taking: Evidence from “Zodiac Year” Beliefs in China," Management Science, INFORMS, vol. 69(9), pages 5174-5188, September.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5174-5188
    DOI: 10.1287/mnsc.2022.4594
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