Do Superstitious Traders Lose Money?

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 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.