Superstitious finances: the invisible forces guiding your investments

Starting 2025 with bold investment plans? If ASX shares are in your sights, here’s a little friendly advice: try to avoid buying stocks in October.

And no, it has nothing to do with Halloween – it’s the official month of infamous market crashes.  

The Panic of 1907, the Crash of 1929, Black Monday and the 2008 financial crisis all unfolded during this ‘jinxed’ time of the year.

Dr Eunice Khoo, an accounting researcher at the Australian National University (ANU), explains that this grim history has given rise to the widely held belief that stock prices are more likely to decline in October.

“‘The October effect’ is rooted in the fact that nine of the 20 largest single-day percentage declines in the Dow Jones Industrial Average (DJIA) occurred during this month,” Khoo says.

“When superstitions gain attention or are widely discussed, they can create a herd mentality where investors collectively avoid certain actions or follow specific predictions.”

“Non-scientific barometers can be amusing, but they shouldn’t guide serious decision-making”

While these unfounded theories aren’t based on empirical evidence, they still have the power to influence day-to-day economics.

“Research shows that superstitions can significantly impact financial decision-making and the stock market,” Khoo says.

“For instance, market index returns on Friday the 13^th are notably lower than on other Fridays.”

Separating fact from fiction

In many parts of the world, superstitions are so intricately woven into society that they’re practically impossible to ignore.

Take Chinese horoscopes. Did you know your zodiac year is traditionally believed to bring nothing but bad luck?

According to Chinese mythology, people in their zodiac year offend Tai Sui, the God of Age, incurring in a curse of misfortune.

Although, sometimes, the power of superstition can work in unexpected ways.

A recent study co-led by Khoo shows that zodiac year beliefs have positive effects on the work of auditors – those responsible for reviewing the financial records of an organisation. 

“Our study found that lead engagement auditors in China may exhibit increased caution during their zodiac years.

This risk-averse mindset appears to make them more concerned about missing mistakes, leading to stricter adherence to accounting standards and reduced tolerance for questionable client practices, which could contribute to improved audit quality,” Khoo says.

This is one of the few rare instances where superstition actually has a scientifically-backed upside.

Khoo explains most studies in the corporate context focus on the negative outcomes of these beliefs, warning against the perils of irrational decision-making.

“Acting on unfounded beliefs instead of sound analysis can cause mispricing, volatility or poor financial outcomes,” she says.

“I believe investors and auditors are somewhat aware that psychological factors such as biases and emotions can influence their decisions. However, recognising these factors doesn’t always mean they can avoid them.

“While superstitions usually play a minor role, they can amplify emotional reactions and herd behaviour, creating issues such as market bubbles or crashes.”

When superstition meets fanaticism

Financial superstitions have also found their way into pop culture.

In 1978, a New York Times sportswriter popularised the Super Bowl Indicator, a quirky (and completely unscientific) barometer that, to this day, suggests the outcome of America’s favourite TV event can predict the stock market’s direction.  

Entertaining? Certainly. Reliable? Absolutely not.

In an age where conspiracies are inundating the internet, Khoo urges caution.

“Non-scientific barometers can be amusing, but they shouldn’t guide serious decision-making,” she says.

“It is important to prioritise critical thinking and rely on evidence-based research instead. By being mindful of our information sources, we can help prevent the spread of false information.

“Studying superstition in accounting and finance is important because these areas directly impact people’s financial well-being.

“Research in psychology shows that humans tend to rely on superstations as a way to cope with uncertainty.

“By recognising these psychological factors at play, we can help enhance training for professionals, creating a healthier financial environment.”

So, if your star sign promises infinite riches for the new year, you may want to think twice before swiping your credit card. Superstition might add colour to our lives, but when it comes to your money, only hard facts should be leading the charge.