Use of auspicious numbers in China initial public offerings

Abstract

This Applied Research Project investigates the effect of superstition on stock market

behaviour. Past studies show that the occurrence of ominous events (such as eclipses and Friday the 13th) is associated with below-average stock market returns and trading volumes.

In this paper, we seek to determine the value of a listing code’s luckiness in China’s stock markets. The luckiness of the listing codes are based on the Chinese common beliefs that the numbers 6, 8 and 9 are lucky while the number 4 is unlucky. With a focus on the first day of IPO listing, we investigate the potential impact of a listing code’s luckiness on a share’s trading price, volume and underpricing. Using a sample of 1,775 firms that were listed between the years 1990 to 2009; we find that A-shares with lucky listing codes have higher trading prices and volumes than those with neutral listing codes.