Chinese superstition in US commodity trading

Abstract

We examine the potential effect of Chinese superstition on the prices of four commodities traded in the US commodity market using daily data from January 1994 to September 2012. We focus on market responses to days that Chinese traders superstitiously deem as either lucky or unlucky. Our results suggest that day 4 in the month (considered unlucky) is associated with significantly lower returns for three commodities (copper, cotton and soybean). The evidence controls for the possible effects of other anomalies and emerges despite the fact that China buys only about half of the US total exports of these commodities. These results seem in conflict with an efficient US commodity market as it opens the possibility for formulating profitable trading rules based on day 4 trading.

Keywords:

• superstition
• commodity markets
• seasonality

JEL Classification:

• G14
• C12

Notes

¹ Chinese consider number 4 as unlucky perhaps because several Chinese dialects pronounce number 4 similar to the word of death, while number 8 is deemed lucky because its pronunciation sounds like the word of wealth. Number 3 is also believed to be a rhyme for growth in Chinese. It appears that Chinese superstitions may have been transmitted to other countries. For example, some large hotels in Las Vegas omit floor numbers 4, 14, 24, 34 and 40 to 49.

² We use LME-Aluminium 99.7% Cash U$/MT; Cotton, 1 1/16Str Low-Midl, Memph C/LB; Soyabeans, No.1 Yellow C/Bushel; Copper Cathode C/LB.