Superstition and financial decision making

In Chinese culture, certain digits are lucky and others unlucky. We test how such numerological superstition affects financial decision in the China IPO market. We find that the frequency of lucky numerical stock listing codes exceeds what would be expected by chance. Also consistent with superstition effects, newly listed firms with lucky listing codes are initially traded at a premium after controlling for known determinants of valuation multiples, the lucky number premium dissipates within three years of the IPO, and lucky number firms experience inferior post-IPO abnormal returns

Existence and Time Trend of the Psychological Barrier in Bitcoin Markets: Evidence from US, Europe, Hong Kong

In this paper, we examine the existence of psychological barriers in three Bitcoin markets, Coinbase of the US, Bitstamp of Europe and Bitfinex of Hong Kong. Using barrier proximity and hump tests, we found consistent evidence for the simultaneous existence of price barriers and clustering; barriers at the 1000- and 10000-level, and clustering at the 10- and 100-level. Also, we examine, for the first time, the time-varying trends of the price barriers in the three markets by using the coefficients from the proximity tests. The overall trend of barriers seems to drop at the 1000-level barrier after the historically high price, but the 10000-level barrier appears at the same moment with sufficient magnitudes, indicating a psychological barrier jumping . This paper contributes to the literature on psychological barriers and price clustering, and also on market efficiency and market anomalies

Czy inwestorzy na GPW w Warszawie powinni być przesądni? Na przykładzie stóp zwrotu 24 indeksów Giełdy Papierów Wartościowych w Warszawie

The problem of financial markets efficiency, especially the calendar effect, has always fascinated scientists. The issue is significant from the point of view of assessing the portfolio management effectiveness and behavioral finance. This paper tests the hypothesis of the unfortunate dates effect upon 22 equity indices, published by the Warsaw Stock Exchange, in relation to the following four approaches: close-close, overnight, open-open, open-close calculated for the sessions falling on the 13th and 4th day of the month, Friday the 13th and Tuesday the 13th,while the second observation group is composed of rates of return of remaining sessions. In the following part of the paper, the statistical equality of one-session average rates of return (close-close) for sessions falling on Friday 13th and sessions falling on other Fridays will be compared as well as for sessions falling on Tuesday the 13th and sessions falling on other Tuesdays. Problematyka efektywności rynków finansowych, w tym występowanie efektu tygodniowego, zawsze stanowiła przedmiot zainteresowania badaczy. Zagadnienie to staje się niezwykle ważne z punktu widzenia oceny efektywności zarządzania portfelem aktywów, a także w ujęciu finansów behawioralnych. W artykule została zweryfikowana hipoteza występowania tzw. dni pechowych na przykładzie stóp zwrotu 22 indeksów giełdowych publikowanych przez GPW w Warszawie. Badaniu poddano stopy zwrotu obliczone w następujących ujęciach: cena zamknięcia – cena zamknięcia, overnight, cena otwarcia – cena otwarcia oraz cena otwarcia – cena zamknięcia dla sesji przypadających w następujących dniach: 13. i 4. dzień każdego miesiąca, 13. i piątek oraz 13. i wtorek każdego miesiąca, podczas gdy drugą grupą obserwacji były stopy zwrotu w trakcie pozostałych sesji. W dalszej części opracowania zamieszczono wyniki testowania hipotez statystycznych w ujęciu cena zamknięcia – cena zamknięcia dla sesji odbywających się 13. i w piątek oraz 13. i we wtorek, przy założeniu, że drugą grupę obserwacji stanowią stopy zwrotu odpowiednio w pozostałe piątki i wtorki

The effects of personality and IQ on portfolio outcomes

We use responses to a self-report survey and matched administrative data to investigate the effects of personality (Big Five traits) and IQ on individuals’ stock trading portfolios. Traits have small but significant effects: openness and extraversion are associated with undesirable outcomes whereas conscientiousness is associated beneficially. Higher IQ is associated with lower trading activity but not enhanced investment performance. We postulate these factors influence outcomes in a complex manner, and exert over long timeframes. With portfolio size held constant, financial literacy has little effect. Other factors, such as customer age, portfolio size and portfolio risk, better explain outcomes

Technical analysis for profitable trading

This dissertation contributes to the current literature regarding the effectiveness of technical analysis as a trading tool and its usefulness for holding period return predictability. Using exclusively technical analysis patterns as input features, the author shows substantial minute holding period return predictability for the EUR/USD, USD/JPY and GBP/CHF exchange rates, during some periods in the first decade of the 21st century. The implemented investment strategies are based on a rolling window of logistic regression algorithms with an adjusted decision threshold. The models’ observed predictability was capable of being materialized in an intraday technical analysis trading strategy that would’ve produced wealth out-of-sample and after transaction costs. The confidence, predictability and profitability capacity of the models appears to be declining and may no longer exist.Esta dissertação contribui para estudos recentes relativos à eficácia de análise técnica como uma ferramenta de investimento e a sua utilidade na previsão de retornos do período de retenção. Utilizando exclusivamente padrões de análise técnica como variáveis independentes, o autor mostra previsibilidade substancial nos retornos de período de retenção ao minuto, para as taxas de câmbio EUR/USD, USD/JPY e GBP/CHF, durante alguns períodos da primeira década do século XXI. As estratégias de investimento implementadas são baseadas numa janela deslizante, que utiliza algoritmos de regressões logísticas com um limite de decisão ajustado. A previsibilidade de retornos observada pelos modelos foi materializada numa estratégia intradiária que teria produzido riqueza para o investidor, fora de amostra e após custos de transação. A confiança, capacidade de previsão e lucratividade dos modelos aparenta ter vindo a dissipar- -se, podendo já não existir

Numerological Superstitions and Market-Wide Herding: Evidence from China

We empirically investigate the effect of traditional Chinese numerological superstitions over market-wide herding in the Shanghai and Shenzhen stock exchanges for the 2000–2020 period, based on a classification of stocks as lucky/unlucky contingent on the presence of digits deemed numerologically lucky/unlucky in their tickers. We find no compelling evidence that herding is more pronounced in those superstitious stocks, as compared to the rest of the stock market. Both superstitious stock-types herd exclusively on high-volatility days and exhibit some pronounced patterns in up vs down markets; these effects are not significantly different from the behaviour of non-superstitious stocks, however. Similarly, herding in both superstitious stock-types is largely noise-driven, but the same effect is observed for non-superstitious stocks. The similarities in herding between superstitious and non-superstitious stocks suggest that numerological superstitions do not motivate significantly stronger herding in Chinese markets

Do Superstitious Traders Lose Money?

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 the “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.postprin

Numerological Superstitions and Market-Wide Herding: Evidence from China

We empirically investigate the effect of traditional Chinese numerological superstitions over market-wide herding in the Shanghai and Shenzhen stock exchanges for the 2000-2020 period, based on a classification of stocks as lucky/unlucky contingent on the presence of digits deemed numerologically lucky/unlucky in their tickers. We find no compelling evidence that herding is more pronounced in those superstitious stocks, as compared to the rest of the stock market. Both superstitious stock-types herd exclusively on high-volatility days and exhibit some pronounced patterns in up vs down markets; these effects are not significantly different from the behaviour of non-superstitious stocks, however. Similarly, herding in both superstitious stock-types is largely noise-driven, but the same effect is observed for non-superstitious stocks. The similarities in herding between superstitious and non-superstitious stocks suggest that numerological superstitions do not motivate significantly stronger herding in Chinese markets

Numerological Superstitions and Market-Wide Herding: Evidence from China

We empirically investigate the effect of traditional Chinese numerological superstitions over market-wide herding in the Shanghai and Shenzhen stock exchanges for the 2000–2020 period, based on a classification of stocks as lucky/unlucky contingent on the presence of digits deemed numerologically lucky/unlucky in their tickers. We find no compelling evidence that herding is more pronounced in those superstitious stocks, as compared to the rest of the stock market. Both superstitious stock-types herd exclusively on high-volatility days and exhibit some pronounced patterns in up vs down markets; these effects are not significantly different from the behaviour of non-superstitious stocks, however. Similarly, herding in both superstitious stock-types is largely noise-driven, but the same effect is observed for non-superstitious stocks. The similarities in herding between superstitious and non-superstitious stocks suggest that numerological superstitions do not motivate significantly stronger herding in Chinese markets