The Impacts of Superstition on Risk Preferences and Beliefs : Evidence from the Chinese Zodiac Year

Previous studies have extensively confirmed that superstition has a wide range of impacts on economically consequential decisions. The underlying mechanisms, however, remain largely unexplored. In particular, superstitions can influence either people’s endogenous risk preferences or subjective beliefs about uncertain events. Clarifying which of these two mechanisms is at work is of both policy and practical relevance. Specifically, a change in risk preferences does not break away from the conventional utility maximization framework, while a distortion in beliefs may lead to a welfare loss in decision-making. In this paper, we disentangle these two mechanisms using novel experimental methods by taking the Chinese zodiac year as an example. We find that the zodiac year is associated with both an increase in risk aversion and excessive pessimism in decision-making. Moreover, we illustrate the potential impacts of the zodiac year superstition in real-world businesses via two case studies