Chinese Investors Crunching Numbers Are Glad to See 8s
May 31st, 2007
Submitted By: Kerry Huang
See this Wall Street Journal article (Chinese Investors Crunching Numbers Are Glad to See 8s).
In the US and most developed nations, investors carefully study companies before making investments. Financial institutions with seasoned analysts account for a bulk of the transactions on the stock exchanges. However, in China many of the investors are unexperienced individuals who base their decisions on “lucky numbers”; specifically, the number eight, which signifies “wealth” in Chinese. According to the article, investors will buy a company’s stock if the number eight
is in it.
Many will find this practice laughable but the Chinese take lucky numbers very seriously. For example, as we ride the elevators in China one will notice that the buttons for floors 14 (”want death”), and 24 (”easy death”) do not exist. With 60% -80% of China’s trades being made by inexperienced investors, one wonders what will happen to the stock market? Will these superstitious investors crash the market? How will the government regulate such trades?
Side note: Even Chinese American’s who grew up with superstitious parents are affected by lucky numbers. My normally rational friend freaks out every time she looks at the clock and it reads 4:44, which is “death death death.”
Entry Filed under: Pre-Departure, Beijing, Shanghai, Shenzhen, China, Misc.
7 Comments Add your own
1. Chris Carr | June 1st, 2007 at 9:43 am
Good post.
Fascinating topic and cool potential study for a joint paper by a finance prof and sociologist.
Hard to believe that folks would buy stocks on such a basis, yet, they do. I can’t imagine putting down $50,000 based on a lucky number.
On other other hand, I wonder to what extent the every day joe trader basis his/her buy/sell decisions on info that is any more “solid” than lucky numbers!
2. Patrick McGuire | June 1st, 2007 at 10:34 pm
As somoene who is fascinated by the gaming (casino) industry, I’m really not that surprised by this. Casinos makes millions of dollars a day from people who hardly blink at putting $50,000 on a bet that a ball will land on their “lucky” number on a roulette wheel.
And there are many Finance books written that argue investing isn’t much different. Most experts agree that stock prices already incorporate the net value of all public knowledge about the company’s future prospects, i.e. it isn’t possible to know if a stock will go up or down. Fooled by Randomness, for example, argues that much of the gains in investing come by chance. So is investing much different from roulette anyway? I’m sure the next person will say that you can achieve a reasonable expectation of the future of a stock price, but it’s the same thing in roulette. You can use very basic math to calculate the odds of a return on roulette. In the stock market, if the price is not rationally based, an investor will take advantage of that (buying or selling) and the price will correct itself quite quickly I’d imagine. But then if people are not buying based on a rational reason, one can expect that some will overvalue the stock and others will undervalue the stock and the gambling alone should cause the stock to hover around its natural price without intervention from an expert. So how much more success can a seasoned investor get than someone who invests on chance anyway?
3. Stacey Westenberger | June 3rd, 2007 at 9:29 pm
I was first introduced to the Chinese belief in lucky numbers in my architecture education. As a designer, we studied how different cultures view and use buildings. The information regarding numbering floors and rooms was introduced as well as feng shui in Chinese culture. Last summer, while I was working for Callison in Seattle, designers were consulting Feng Shui books in order to apply the principles to projects in China and also projects within the U.S. that might have a high numbers of Chinese tenants. Incorporating these issues into the design can be a determinant of project success or failure.
One question we might ask Callison Architecture in Shanghai is if they continue to skip the 14th and 24th floors in their buildings. Also, with an increased demand for design and construction being filled by western architecture firms, do they see a lack of understanding for Chinese cultural beliefs in the designs? Being a U.S. based company with an office in Shanghai employing Chinese workers, does it give them an advantage in recognizing these issues?
4. Chris Carr | June 4th, 2007 at 5:59 am
Yes, great idea for questions for Callison …
5. Peter Wu | June 4th, 2007 at 9:02 pm
The number 4 is a big deal. I remember buying my car last summer when I have already negotiated the price to $14K and shook hands with the dealer to seal the deal. However, when my parents told me that 14 is bad luck, I have to talk to the dealer again to lower the price to $13988, a $12 difference. Of course the dealer won’t budge, so I paid him $12 in cash just so the paperwork can say $13988. 9 to the Chinese means everlasting, so I am suppose to have gotten “everlasting wealth” luck with 988. but I am not sure about the 13 part……
6. Fatih Sunor | June 9th, 2007 at 4:03 pm
When I first read the post, I laughed a lot and thought that this is crazy. How can you associate luck with some innocent numbers? After having a little research about it I figured out that those numbers are actually not that innocent. According to most websites the main reason of numbers being lucky or unlucky is the Chinese word that the number name sounds similar to. Since the pronunciation and the vocabulary may vary greatly in different Chinese dialects, the rules are not generally applicable for all cases.
7. James Towers | June 13th, 2007 at 1:05 pm
I doubt that superstitious Chinese will crash the market. I bet even seasoned Wallstreet investors are afraid to buy stocks that contain the numbers “666″ or “13″. Anyone who has ever gambled or played sports has their particular superstitions, and I would assume that investing is no different. There are probably tons of mom and pop investors who are scared to invest on Friday the 13th, Black Monday, or 911, yet there does not seem to too much of an industry effect on these days. As Patrick said, markets tend to correct themselves to what people are willing to pay. With that in mind, is there potential for arbitrage here by buying Chinese stocks at $44.40 and selling them at $45?
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