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Do Superstitious Traders Lose Money?

Author

Listed:
  • Utpal Bhattacharya

    (Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • Wei-Yu Kuo

    (National Chengchi University)

  • Tse-Chun Lin

    (University of Hong Kong)

  • Jing Zhao

    (Hong Kong Polytechnic University)

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.

Suggested Citation

  • Utpal Bhattacharya & Wei-Yu Kuo & Tse-Chun Lin & Jing Zhao, 2019. "Do Superstitious Traders Lose Money?," HKUST IEMS Working Paper Series 2019-62, HKUST Institute for Emerging Market Studies, revised May 2019.
    • Handle: RePEc:hku:wpaper:201962
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    References listed on IDEAS

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