Will Superstition Make You Rich?

The Economics of Superstition and the Markets.

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Human beings are a notoriously superstitious bunch. Especially when money’s involved. But eating the same thing for lunch every day won’t help you become a successful day trader any more than it’ll help you win an NBA title. 

Here are a few of the stranger superstitions investors have tried to use to beat the market.

October’s spooky for stock brokers

Wall Street’s scariest days may have come during the spookiest season, from the Crash of 1929 to 1987’s Black Monday to the ‘97 “mini-crash,” but October’s bad rap is an overblown urban legend. September’s historically been the worst month for stock market performance, dating all the way back to 1897.

Friday the 13th slashes stocks

Traders + teen camp counsellors 🤝 are terrified of Friday the 13th. But superstitions around lucky (and unlucky) numbers aren’t just a North American phenomenon. Taiwanese traders’ preference for placing limit orders ending in 8 costs them, coincidentally enough, 8.8% in annual returns.

 The Super Bowl Theory

This one’s pretty straightforward: if an NFC team wins the Super Bowl, the market will have a good year. If an AFC team wins, it’ll have a bad one. So, wait, if the Bears win, we’ll be in a bull market? Go figure.

Beware the full moon

According to Wall Street, the moon controls the tides and the market. Eclipses – lunar and solar – see lower returns and trading volumes. Lunar cycles can supposedly influence our moods. Or maybe investors are just afraid of werewolves.

“Sell in May and go away”

This classic UK saying warns investors to take summers off, but the data doesn’t support the extended holiday. Conventional wisdom doesn’t either. Instead of trying to “time the market” using a catchy rhyme, it’s smarter and safer to invest for the prosaic long haul

Algorithms can be superstitious too 

In 2012, a British art student created “Sid the Superstitious Robot” to trade based on some of the classic superstitions mentioned above. After only three weeks, Sid’s fund lost 12% of its value, helping prove that the same superstitions we think will protect us actually cost us in the long run.