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5. Conclusion
Empirical studies are rare regarding the religious beliefs in eastern countries since the difficulties for searching alternative variables. This paper aims at filling the gap. As a result, the paper uses special event—ghost month—originating from Chinese religious beliefs and Chinese lunar calendar in Taiwan as an alternative variable. The results of regressions reject the null hypothesis, which supports the view that security markets are systematically influenced by investor psychology and superstition and sentiment coming from inauspicious day and argues for models of asset-pricing. In addition, rejection of the null hypothesis supports the hypothesis that financial markets are, to some degree, irrational and, thereby tossing doubt on the hypothesis that security markets reflect nothing but economic information.
Despite proving that religious beliefs and superstition do have influence on stock market, the result shows that there are only slight significant changes in return during the period, which means that investors’ irrational behavior does not definitely promise profits through speculation. Nevertheless, it demonstrates that investor should better avoid selling stocks during ghost month since the obvious dropping in trading volume implies it may be harder to sell. Furthermore, the return of five days after the end of ghost month displays a rather larger and significant consequence (-0.323%) and implies the religious beliefs and superstition truly leads to negative effect on stock market.
As for the constraint, there is a difficulty in distinguishing institutional investors and individuals. Though past studies suggest that individuals are more irrational than institutions and it would be a good explanation for that trading volume and stock return
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anomalies mainly come from individuals. However, since they could reflect both directions with institutions usually have larger ability to affect them, it would be better to discuss this issue through a separate empirical analysis. The results might be more representative.
This paper uses data and the idea of religious superstition in seventh month in Chinese lunar calendar in Taiwan, a representative area in inheritance of Chinese traditional culture in East Asia, and the result is a part in the puzzle of the relationship between eastern religion and financial markets. Since there are a lot of religions in this region, also the diversified customs within a country, how to find other appropriate and reliable alternative variables is always a difficult question to discuss.
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