Estimating the superstition value: why not decomposition analysis?

Abstract

Superstitious belief of the number of eight as a lucky number is common among the Malaysian Chinese as its pronunciation carries the meaning of “prosperity”. Nevertheless, for the non-Chinese (i.e. Malay) who do not believe in superstition, it is just a neutral number. The existence of the two groups provides a natural setting to use the nonlinear decomposition analysis. This innovative approach allows us to decompose the price premium of number 8 obtained from the hedonic regression model into superstition and non-superstition components. The nonlinear decomposition analysis shows that approximately 37% to 45% of the estimated premium value which are associated with number 8 is attributed to superstition. This implies that the estimation of previous studies on superstitious value of number eight by using the hedonic regression model is subjected to an upward bias.

Keywords:

• Chinese superstition of numbers
• car plate number
• hedonic regression
• nonlinear decomposition analysis

JEL CLASSIFICATION:

• D12

Acknowledgement

We are also grateful to the two anonymous referees whose constructive comments have improved this paper substantially.

Disclosure statement

None.

Notes

1 Wong and Yung (2005) for instance documented that people who were born in the lucky year (dragon year) according to Chinese astrology did not earn significantly more than their non-lucky year born counterparts. Argarwal et al. (2014) do not find owners of luck house numbers in Singapore to face significantly lesser car accidents and traffic summons.

2 Malaysia’s multi-racial society comprises of Malays and other indigenous people (69.6%), Chinese (22.6%), Indians (6.8%) and other races (1%). Department of Statistics website retrieved on 18 April 2021.

3 Besides number 8, the Chinese also like a few numbers such as number 2, 3, 6 and 9 for their pronunciation also carries an auspicious meaning. Number 8, however, stands out as compared to the other numbers.

4 Based on an exchange rate of 1 Yuan = USD0.15 as of April 2017.

5 This is the latest available data from the RTD of Malaysia. Since superstitious and cultural values tend to be constant in the short-run, we therefore consider our findings derived from the car plate auction data up to year 2013 to be generalizable.

6 In the present paper, the non-Chinese bidders comprise of the Malay bidders only.

7 Since the data comprises the period of 2011 to 2013, we present the equivalent value of US$based on an average exchange rate as of 2013 where RM3.1504 was equivalent to US$1 (source: https://www.exchangerates.org.uk/USD-MYR-spot-exchange-rates-history-2013.html ). In 2013, the average salary in Malaysia was RM2231 per month (source: https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=R1pZQ0RqRjY0aFJjcUM4cS9zcUdTZz09 )

8 This superstition in number of 8 (sup) refers to functional motivation only. The other motivations of superstitions are captured by the conspicuous consumption effects in number 8 (con) and other non-superstition preferences in number 8 (oth). Due to the teaching of Islam that prohibit Malay from practicing superstitious belief (see Fadzli et al. 2015), we assume number 8 does not provide any superstition functions (instrumental motivation) to Malay winning bidders. Thus, the superstition in number 8 (sup) is assumed to be zero.

9 This is not a strong assumption because both the Chinese and Non-Chinese car owners are facing the same resale car market in Malaysia. Resale consideration effects for number 8 should not differ significantly by sellers’ ethnicity, thus, b_c2con_c $\approx$ b_m2con_m. Similarly, conspicuous consumption effects in number 8 should be equal to winning bidders of all races. For example, a one-digit car plate should have the same social status to its owners regardless of their ethnicity. Thus, it is reasonable to assume that b_c1oth_c$\approx$ b_m1oth_m. Since the Non-Chinese is neutral to the number of 8, their superstition value of number 8 is equal to zero.

10 The mean of predicted bid price (using Model 6 of Appendix 2) is RM1397.89 (US$443.72 or 63% of mean salary) for all bidders, RM1831.26 (US$581.28 or 82% of mean salary) for the Chinese bidders and RM869.15 (US$275.89 or 39% of mean salary) for non-Chinese); the bid price gap is RM962.11 (US$305.39 or 43% of mean salary).

11 0.37 x 965 = 357; 0.45 x 965 = 434.

Additional information

Funding

We would like to thank the Ministry of Higher Education Malaysia and Universiti Utara Malaysia for providing financial support to this study through the FRGS (Fundamental Research Grant Scheme) research grant (Code S/O: 13018).

Notes on contributors

Hock-Eam Lim

Lim Hock-Eam is a professor in the School of Economics, Finance and Banking, Universiti Utara Malaysia. He obtains his Ph.D. from Monash University, Australia (Clayton campus). His area of research interest includes labour economics, economics of happiness, applied micro-econometrics, and economics of education.

Woei-Chyuan Wong

Wong Woei Chyuan is Associate Professor in the School of Economics, Finance and Banking, Universiti Utara Malaysia. He received his Ph.D in Real Estate from National University of Singapore. His research interests include securitized real estate, REITs and property auction market. He has published his works in primary real estate journals, i.e. Real Estate Economics, Journal of Real Estate Finance and Economics, Real Estate Literature, Real Estate Finance and Pacific Rim Property Journal.

Nur Adiana Hiau Abdullah

Nur Adiana Hiau Abdullah holds a Ph.D from Aston University, UK. She is a Professor of Corporate Finance. Her research interest covers different areas of corporate finance and investment and portfolio theory which include initial public offering, dividend, corporate failure, capital budgeting, rights issues and unit trusts.