It all sounds rather ridiculous, until you discover that Sid and the Superstitious Fund illuminate some disquieting truths. On the one hand, magical thinking is, of course, everywhere: unlucky numbers; the dangers of Friday the 13th; boosted birth rates in the year of the dragon; holding one’s breath when driving past a cemetery; black cats, rabbit’s feet, horoscopes, crossed fingers, lucky underwear, and every palm reader, healer, mystic, shaman, soothsayer and woo-woo yoga instructor from New York to New Guinea.
But the last thing you want is the steward of your money making decisions based on slight vibrations in the cosmos. When it comes to matters financial, we’re all business, right?
Hardly. A generation of behavioural economics research has demonstrated that standard predictions of how we treat and handle money have woefully misread Homo sapiens. Rational we are not.
For example, a tax incorporated into a price tag on supermarket shelves makes us more frugal, whereas an equivalent tax added at checkout is virtually ignored. We also spend the same money differently depending on whether it’s labelled credit, rebate, or bonus, and our willingness to pay for stuff is heavily influenced by the payment method. One recent article listed eleven ways in which consumers behave irrationally when confronted with maths. There are probably more. When it comes to moo-la, the technical term for us is “cuckoo”.
Inconsistencies born from biases and tricks of the mind are one thing; superstition is another. The idea of a “Friday 13th effect” came to prominence thanks to a 1987 study by Robert Kolb and Ricardo Rodriguez, two finance professors at the University of Miami, who found that you are more likely to lose in the stock market on that day, as opposed to a “normal” Friday. Their findings have since been disputed by other stock market studies, but Kolb and Rodriguez say the paper was published tongue-in-cheek. Their point was not that the day itself had an effect, it was to illustrate how superstition has an effect on our behaviour.
These beliefs have a massive, and largely negative, impact on the economy –boom times for fortune tellers notwithstanding. Chung has estimated that Friday the 13th costs the US alone hundreds of millions of dollars, due not only to all those elevators and buildings indicating the absence of a 13th floor, but also lost revenue due to shortened vacations and purchases bypassed because of that unlucky date. Realtors in Hong Kong have reported that apartments deemed haunted might sell for as little as 40% of what a comparable un-haunted apartment might bring in.
According to a recent Wall Street Journal article, the majority of stock traders in Shanghai are not bankers pursuing value based on market analysis, but everyday individuals who “gamble on numerical superstitions, with little understanding of concepts from the financial arena.” Not that those who have mastered said “concepts” have necessarily done great things for anyone of late. “Given the failure of all these sophisticated mathematical models that have turned geniuses into morons over the years,” says Marc Hochstein, executive editor of the financial services daily American Banker, “it’ll be interesting to see how a model [like Sid] that intentionally has no rhyme or reason performs.”
Three years ago, a finance professor in Copenhagen looked at 80 years worth of data from the New York Stock Exchange, S&P 500, the Dow Jones Composite Average, and the Dow Jones Industrial Average, and tried to determine whether the 362 solar and lunar eclipses that took place over that time period affected investment decisions and the economy. “[T]he stock market is an ideal breeding ground for superstition,” wrote Gabriele Lepori, who found below-average returns during times of “negative superstitious events”, like eclipses.