Superstitious Behavior in Financial Decision-Making

Abstract

Superstition surrounding lucky numbers is observed to affect behavior in consumer goods and investment markets alike. In paying more (less) for assets perceived to be lucky (unlucky), individuals are revealing themselves as ‘enculturated’ actors in their financial decisions. This paper develops an economic framework for identifying the value assigned to ‘luck’ and examines the effect of the numbers 8 and 4 in addresses on housing prices in Sydney, Australia. These numbers are considered exceptionally lucky and unlucky, respectively, in Chinese culture. This is the first paper to test for luck-motivated behavior in both transaction and rental housing prices. Contrary to prior studies we find no evidence of a price premium (discount) attached to the number 8 (4) in transaction prices. Rental prices, however, indicate a statistically significant premium attached to the number 8 in areas of high Asian-migrant population. We provide evidence to demonstrate that this result can not be explained by a rational expectation of future luck-motivated behavior. Taken together, these results indicate that perceptions of luck are culturally-determined and that luck provides amenity, not investment, value.