10 strange financial papers

While, of course, there are many very serious – and fascinating – academic papers on finance, such as Multifractality and long-range dependence of asset returns: the scaling behavior of the Markov-switching multifractal model with lognormal volatility components, there are other papers that are…well, a little strange. This article lists ten such papers.


A long list of questions could be compiled to which the simple answer is no. A good source for such questions is headings from the UK newspaper, the Daily Mail (e.g. Are we all going to die next Wednesday?). Another good source is academic papers. In one paper below the implicit question is: are stock returns affected by ghostly legends? Short (and long) answer: no. Another paper finds a correlation between a country’s linguistic diversity and stock market trading volumes. Perhaps this simply results from the number of trades that have to by reversed following language confusion: “I thought you said buy?”, “No, I say sardine!”

A strong contender for the Paper in Poor Taste Award would be the one below looking at the influence of sudden celebrity deaths on the stock market (the inclusion of the word “sudden” in the title will no doubt be appreciated by the judges of this award). John Kay recently wrote an excellent article about the wisdom of crowds (The parable of the ox); appearing here is a paper that tackles the same topic but in a rather left-field context. The paper finds that the price movements of tourism stocks on the Tel Aviv Stock Exchange more accurately forecast the success of ceasefire agreements in the Levant than did editorials in the Jerusalem Post and New York Times.

How is your well-being? The authors of a paper here believe it (that is, your well-being) is affected by the stock market and that the government should do something about it. And if the government doesn’t do something about it, this other paper reckons we’re all going to the loony bin.

Finally, nomination for one of the creepiest papers must go to the one here that found that when CEOs are away from their headquarters companies announce less news than usual. Fair enough, but to analyse this the author identified CEO absences by “merging corporate jet flight histories with records of CEOs’ property ownership near leisure destinations”. We’ve had shareholder activists, are we now to see the rise of shareholder stalkers – would-be analysts hiding in the bushes with binoculars checking on the holiday timetables of CEOs?

INDEX (of papers listed below)

  1. Anomalies in Finance: Superstition in the Italian Stock Market [2010]
  2. Ghostly Traditions and Market Performances [2013]
  3. Chinese superstition in US commodity trading [2014]
  4. Linguistic Diversity and Stock Trading Volume [2013]
  5. Tailspotting: Identifying and profiting from CEO vacation trips [2012]
  6. Local sports sentiment and returns of locally headquartered stocks: A firm-level analysis [2012]
  7. The Effects of Sudden Celebrity Deaths on the US Stock Market [2011]
  8. The Oracle or the Crowd? Experts versus the Stock Market in Forecasting Ceasefire Success in the Levant [2011]
  9. Does the Market Make us Happy? The Stock Market and Well-being [2013]
  10. Do stock prices drive people crazy? [2014]


Anomalies in Finance: Superstition in the Italian Stock Market
Authors [Year]: McGuckian, Fergus J [2010]
Journal [Citations]:
Abstract: The efficiency of global financial markets has long been a topic of contention for both academics and industry professionals alike. Evidence suggests that most of the time, asset markets do a good job of correctly processing and assimilating information into prices. However, a substantial literature has built up proof which indicates that this is quite often not the case. A wide variety of anomalies and so called ‘effects’ have been documented revealing stock price behaviour that is inconsistent with the predictions of traditional models. These inconsistencies illustrate departures from theory and are unexplainable within the mainstream economics paradigm; conversely, many anomalies can be accounted for using explicit insights from behavioural finance. This study discusses the theoretical debate and investigates whether financial markets are affected by superstition and if so, if this is reflected in asset prices. A new discovery is added to the literature, namely the Friday 17th anomaly; with regard to the Italian MIB Storico index results indicate that in comparison to regular Fridays – which are aggregately positive – returns for Friday the 17th are four times larger and statistically different.
Ref: AA469


Ghostly Traditions and Market Performances
Authors [Year]: Yang, Der-Yuan and Andy Chien [2013]
Journal [Citations]:
Abstract: Old traditions never die; they just fade away. However, some are still deeply embedded in our life and practiced every day. This paper examines some notable Taiwanese ghostly legends, testing their potency on the stock markets. The results show that though some ancient beliefs still carry heavy weight in our daily life ostensibly, their impact on the stock market has been negligible. To be sure, some of the customs of our ancestors may have lingered around long er than expected, but contrary to our expectations, their spirits have languished, showing no vigor as financial guidance.
Ref: AA485


Chinese superstition in US commodity trading
Authors [Year]: Chung, Richard and Ali F. Darrat and Bin Lia [2014]
Journal [Citations]: Applied Economics Letters, 21(3), pp171-175
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.
Ref: AA571


Linguistic Diversity and Stock Trading Volume
Authors [Year]: Chang, Yen-Cheng and Hong, Harrison G. and Tiedens, Larissa and Zhao, Bin [2013]
Journal [Citations]: Rock Center for Corporate Governance at Stanford University Working Paper , 134
Abstract: We test the hypothesis that the linguistic diversity of a stock’s investor base leads to more trading. Trading might be due to beliefs differing across languages or investor exposure to multiple languages leading to more trading ideas. Using stock message boards from China, which has ten languages, we measure the linguistic diversity of a stock’s investor base using a Herfindahl index of messages posted from different languages. A firm’s diversity increases in the number of languages spoken in the province where it is headquartered. Using the latter as the instrument, trading volume in a stock rises with its linguistic diversity. We then attempt to discriminate among competing mechanisms. We also show using a sample of forty-one countries that countries with more linguistic diversity have greater stock market turnover.
Ref: AA580


Tailspotting: Identifying and profiting from CEO vacation trips
Authors [Year]: Yermack, David [2012]
Journal [Citations]: NBER Working Paper, 17(4)
Abstract: This paper shows close connections between CEOs’ absences from headquarters and corporate news disclosures. I identify CEO absences by merging corporate jet flight histories with records of CEOs’ property ownership near leisure destinations. I find that CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. When CEOs are away, companies announce less news than usual, mandatory disclosures are more likely to occur late, and stock prices exhibit sharply lower volatility. Volatility increases when CEOs return to work. CEOs spend fewer days out of the office when their ownership is high and when the weather is bad at their vacation homes.
Ref: AA584


Local sports sentiment and returns of locally headquartered stocks: A firm-level analysis
Authors [Year]: Chang, Shao-Chi and Sheng-Syan Chen and Robin K. Chou and Yueh-Hsiang Lin [2012]
Journal [Citations]: Journal of Empirical Finance, 19(3), pp309–318 [7]
Abstract: We undertake a firm-level analysis of the relation between National Football League (NFL) game outcomes and the return patterns of Nasdaq firms headquartered geographically near the NFL teams. We find that a team’s loss leads to lower next-day returns for locally headquartered stocks and that this impact increases for a surprising loss or a critical game loss. The negative effects of game losses are stronger for stocks that are more vulnerable to shifts in sports sentiment. Our results suggest that the game outcomes of local sports teams influence investor sentiment, which significantly affects the returns of localized trading stocks.
Ref: AA591


The Effects of Sudden Celebrity Deaths on the US Stock Market
Authors [Year]: Chen, Zhiping [2011]
Journal [Citations]: Advances in Applied Economics, Business and Development Communications in Computer and Information Science , 209, pp441-447
Abstract: In contribution to behavior finance studies opposing the efficient market hypothesis, this report tests the null hypothesis that sudden deaths of celebrities are economically-neutral events which do not have a significant impact on United States stock markets. The underlining logic being that although economically-neutral events reflect no financial information, it can alter the decision making process of financial professionals by affecting investor mood, confidence, risk aversion levels and emotional states. This in turn, influences the financial markets. Examining index returns with sudden deaths of celebrities nominated on the Hollywood Walk of Fame as a dummy variable, this paper finds no significant evidence against the null hypothesis. Hence, from this perspective, the US financial market is efficient.
Ref: AA592


The Oracle or the Crowd? Experts versus the Stock Market in Forecasting Ceasefire Success in the Levant
Authors [Year]: Bosler, Naomi and Gerald Schneider [2011]
Journal [Citations]: Montréal: International Studies, [3]
Abstract: The forecasting literature disagrees over the accuracy of predictions made by individual experts (“oracles) versus a collective of individuals who are not as well informed (“crowd”). We discuss this controversy in light of competing interpretations of the Condorcet Jury Theorem and evaluate these two competing views in a quantitative analysis of the ex ante success of 21 ceasefire agreements in various conflicts in the Levant. Our analysis compares the forecasts appearing in press commentaries (Jerusalem Post, New York Times) with the expectations that the Tel Aviv Stock Exchange has concerning the fate of these cooperative efforts. To evaluate the predictions of these very dissimilar sources, we analyse the effectiveness of the ceasefires through the number of violent events following the official start of the truce. The analysis shows that tourism stocks especially can be used to predict the success of ceasefires. The forecasts derived from the New York Times are more accurate than a chance prediction, whereas the editorials of the Jerusalem Post assess the prospects of the examined truces less precisely. The overall evidence suggests in line with a traditional interpretation of the Condorcet Jury Theorem and a growing experimental literature that a group of non-experts can provide better forecasts than individual experts.
Ref: AA599


Does the Market Make us Happy? The Stock Market and Well-being
Authors [Year]: Aurora Murgea and Robert D. Reisz [2013]
Journal [Citations]: Economia politica, 1/2013, April, pp69-86 [3]
Abstract: In the last decades, a growing body of literature was dedicated to the analysis of the determinants of well-being. Despite that, the relation between well-being and capital markets has never been investigated, presumably due to the scarcity of subjective well-being time series. The present paper tries to fill this gap explaining why the capital market evolution has an impact on subjective well-being and investigating the relationship between well-being and the stock market in the USA. Empirical tests, using the Gallupp Healthways Well-being Index, Standard & Poor’s S&P 500 and the VIX volatility index show a strong and statistically significant impact of the stock market on well-being. The channels of influence are both monetary, through the income influence, and psychological due to the increase in uncertainty associated with the growing financial fragility and instability. These findings show that pursuing financial stability should be a priority in the agenda of policymakers in order to achieve both economic development and individual well-being.
Ref: AA614


Do stock prices drive people crazy?
Authors [Year]: Chung-Liang Lin and Chin-Shyan Chen and Tsai-Ching Liu [2014]
Journal [Citations]: Health Policy and Planning,
Abstract: This is the first research to examine a potential relation between stock market volatility and mental disorders. Using data on daily incidences of mental disorders in Taiwan over 4000 days from 1998 through 2009 to assess the time-series relation between stock price movements and mental disorders, we observe that stock price fluctuation clearly affects the hospitalization of mental disorders. We find that during a 12-year follow-up period, a low stock price index, a daily fall in the stock price index and consecutive daily falls in the stock price index are all associated with greater of mental disorders hospitalizations. A 1000-point fall in the TAIEX (Taiwan Stock Exchange Capitalization Weighted Stock Index) increases the number of daily mental disorders hospitalizations by 4.71%. A 1% fall in the TAIEX in one single day increases daily hospitalizations for mental disorders by 0.36%. When the stock price index falls one consecutive day, it causes a daily increase of approximately 0.32% hospitalizations due to mental disorders on that day. Stock price index is found to be significant for both gender and all age groups. In addition, daily change is significant for both gender and middle-age groups, whereas accumulated change is significant for males and people aged 45–64. Stockholdings can help people accumulate wealth, but they can also increase mental disorders hospitalizations. In other words, stock price fluctuations do drive people crazy.
Ref: AA751

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