Superstition and Risk Taking: Evidence from “Zodiac Year” Beliefs in China
Ray Fisman, Wei Huang, Bo Ning, Yue Pan, Jiaping Qiu, Yongxiang Wang
Management Science · 2023 · Volume 69 · Issue 9
Abstract
We show that superstitions—beliefs without scientific grounding—impact the investment and risk-taking of Chinese firms. We focus on widely held beliefs in bad luck during one’s “zodiac year,” which occurs on a 12-year cycle around a person’s birth year, to study superstitions and risk taking. We first show a direct correspondence between zodiac year and risk taking via survey data: respondents are two percentage points more likely to favor no-risk investments if queried during their zodiac year. Turning to corporate decision making, we find that return volatility declines in the chairman’s zodiac year, suggesting a reduction in risk taking overall. Focusing on specific types of risk taking, investment in R&D and corporate acquisitions both decline during the chairman’s zodiac year; returns around acquisition announcements are also lower, suggesting real allocative consequences of zodiac year beliefs. This paper was accepted by Gustavo Manso, finance. Funding: W. Huang thanks the Major Project of National Social Science Foundation of China [Grant 17ZDA090] and the “National Program for Special Support of Eminent Professions” for financial support. Y. Pan thanks the National Natural Science Foundation of China [Grant 71790601] for financial support. Y. Wang thanks the National Natural Science Foundation of China [Grant 72172090] for financial support. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2022.4594 .
Keywords
risk aversion, innovation, mergers & acquisitions, volatility, household finance, superstition, China, zodiac year
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