Superstition

[an article probably forthcoming next week]

Superstition is relatively widespread in Eastern Europe – one international comparative study showed that compared to Western Europeans, people in Eastern Europe are more likely to believe in the importance of good luck charms, star signs and horoscopes, and are more likely to believe in the forecasting skills of fortune tellers. Ukraine is no exception with its beliefs about the bad effects of whistling indoors, the ban on giving an even number of flowers (except on funerals that is) and the unmarried girls who shouldn’t sit at the corner of a table.

While seemingly harmless, superstition does affect how people behave, and hence has many important consequences. Take, for example, the belief that marriages that took place in leap years are more likely to be unhappy marriages and to end in divorce. In his 2007 MA thesis, Yuri Strilets, one of the KSE students, showed that in Ukraine there are less marriages in leap years compared to the year before and the year after the leap year, suggesting that Ukrainian couples indeed try to avoid marrying during a leap year. He further showed that, statistically, marriages that started in leap years are not more likely to end up in divorce, suggesting there is no ground to the belief that leap year marriages are bound to fail.

Similarly, many Asians believe that children born in the ‘Year of the Dragon’ will be especially fortunate, will perform well at school, and will have overall a better life. A recent study has found evidence that this superstition has a substantial effect on reproductive behavior: in many Asian countries, there was a baby boom in 1976 which was a ‘Year of the Dragon’, in Taiwan there was even a 15% increase compared to 1975. They further showed that Asian immigrants in the US who were born in 1976 indeed were more educated compared to those from non-Dragon years, but also that the mothers of these Dragon year babies tend to be richer and more educated themselves, making the superstition a self fulfilling prophecy ‘since the demographic characteristics associated with parents who are more able to adjust their birthing strategies to have Dragon children are also correlated with greater investment in their human capital.’

Even business is affected by superstition. One study analyzed license plates auctioned in Hong Kong and found that even the price of a product can be affected by superstition – plates with 8, a sign of prosperity in Cantonese-speaking societies have higher prices while plates with 4, a sign for death have lower prices. Another study found that eclipses, which in many societies are considered bad omens, go together with lower stock market trading volumes and lower stock returns, about 10 basis points less per day over a three day window around the eclipse. These lower returns are then reversed and off set in the subsequent days after the eclipse.

Not surprisingly, economists also have investigated whether a Friday the 13^th effect exists in the stock market. One early study, published at the end of the eighties, showed that during the seventies, US stock returns on Friday the 13^th were lower than on other Fridays. More recent studies, however, show returns on Friday the 13^th that are higher than on other Fridays, both for the US and for many (but not all) other countries. This also seems to be true for Ukraine: using PFTS data for the period 2001 to 2009, the average return for the 15 Friday the 13^th s in this period is 0.6%, while the average of the 30 Fridays before and after Friday the 13^th is -0.1% (statistically a negligible difference). Hence, those that invested in the stock market shouldn’t lose their sleep this Thursday night. Or more precisely and knowing the volatility of the PFTS, they can sleep as good (or bad) as on any other Thursday night.