By: Dr Omair Haroon
Superstition is exceptionally important in Chinese culture. Superstitions beliefs related to numbers are particularly significant and ubiquitous in Chinese social, economic and spiritual domains. For example, number 4 is considered as unlucky while the number 8 is considered as auspicious and many commercial and social decisions are based around this belief.
This study explores the influence of superstitious beliefs on trading activity in equity market of Hong Kong. Hong Kong Stock Exchange designates stocks with numerical stock codes as ‘ticker symbols’. Investors, financial press and brokers usually refer to these stocks by these codes. I investigate whether superstitious beliefs influence trading and pricing of stock codes containing lucky or unlucky numbers. Preliminary evidence suggests that compared to ‘unlucky’ firms, ‘lucky’ firms enjoy higher market valuations. I also find suggestion of greater trading activity and price reaction around earnings announcements for ‘lucky’ firms. Initial explorations indicate that, as demonstrated in extant literature in the case of real estate, retail and other markets of Hong Kong, superstitions also influence economic decisions of participants in equity markets.