Superstition and stock price crash risk

We investigate a new channel that leads to firm-specific stock price crash risk. By using Chinese superstition towards unlucky numbers as a platform for our analysis, we find that investor overreaction to negative news from firms with unlucky listing codes is a mechanism through which superstition affects crash risk. We also show that the effect of superstition on crash risk is more pronounced during volatile periods, down markets, and for more opaque firms. Our results suggest that superstition acts as a substitute for information and leads to adverse consequences when investors are faced with greater uncertainty.