The influence of numerical superstition on IPO underpricing in the People’s Republic of China

Abstract: In Chinese culture, certain digits are considered lucky and others unlucky. This thesis evaluates how numerical superstition affects financial decision-making in the Chinese A-share IPO market for the period between 2003-2015. Evidence has been found that suggests that numerical superstition influences the initial return on the issuing day of A-share IPOs on the Shanghai exchange. On this exchange newly listed firms with the unlucky number 4 and lucky numbers 6 and 8 in their ticker are initially traded at a discount. A superstition effect for the lucky numbers 6 and 8 dissipates after the first trading day but remains visible after the IPO for the unlucky number 4 and disappears within a month. The Shenzhen exchange showed no effects of numerical superstition on the initial return of the first trading date. The additional regression results indicate that after one month and onwards, having an unlucky number in a ticker has a negative influence on IPO underpricing . After the 3rd and 6th month the lucky number 6 is has a significant negative impact on stock return.