The Cat’s Meow

Photo courtesy of Michele Trimarchi

Photo courtesy of Michele Trimarchi

Stevie Wonder sang about thirteen-month old babies and seven years of bad luck in his hit Superstition but who among us isn’t just a wee bit circumspect about certain things? For example, I’m cautious about people whose names start with ‘V’.

It all started in junior school with Velma. She was a chucky blonde bruiser to whom all of us 65-pound weaklings gave a wide berth. Years later, in my first magazine job, there was another troublesome V: Vivian, whose last name also started with a V for a double whammy. By coincidence, she was also a chunky blonde. Vivian acted as the editor-in-chief’s chief enforcer pouncing on unsuspecting editors over missed typos and other real or imagined editorial lapses.

I’m not the only one with name superstitions. One of my friends has had chronic issues with men named Chris. And another acquaintance has learned to avoid Steves altogether. And that’s just superstitions about letters and names! Add numbers, animals, eye and nose shapes, lines on the palm and ‘Do Not Cross’ lines multiply like Kardashians in a swag bag line.

Though we cling to them, it should come as no surprise that being superstitious is a form of idiocy. Idiots make bad investors.

A recent research paper looked at Tawainese stock traders. Among many Asian superstitions is a strong preference for the number ‘eight’ because it sounds like the word of ‘prosperity’; and, conversely, an avoidance of the number ‘four’ because it sounds like the word for ‘death’.

In Taiwan, retail investors are twice as likely to buy stocks whose prices end in an ‘eight’ than a ‘four’. This costs them approximately 8.8% (oops!) annually.

The researchers conclude that this type of superstition is a form of ‘general cognitive disability’. Yet it is one of scores of emotional and cognitive biases that many investors have. We prefer even numbers to odd ones. We prefer to invest in our home country stock market. We believe in lucky streaks (the ‘hot hand fallacy’), and so on.

This type of irrational, yet predictable, behavior makes us catnip to ‘quants’. These are the whiz kids who write algorithms that exploit our biases. Programmed stock trading swoops in and snatches victory from us as we’re counting our chickens.

The good news, according to the same study, is we learn from our mistakes. Getting repeatedly hammered in the markets, we mend our ways and superstitions loosen their grip on us. So don’t worry your pretty little heads about auspicious signs. Instead, follow in the footsteps of the greats: Buy Low, Sell High.


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